June 2010/12

5 (a) Explain why retail businesses should prepare cash flow forecasts. [8]

Define a cash flow forecast

a prediction of all expected receipts and expenses of a business over a future time period, which
shows the expected cash balance at the end of each month.

It indicates the likely future liquidity of a business, enabling appropriate action to be taken if a
cash shortfall is expected – while profit is often seen as being more important in the long term,
cash flow is a key factor in the short term survival of a business. It is important to control and
monitor cash flow and plan ahead.

 identifies the timing of cash shortages and surpluses

 supports applications for funding – enhances the planning process
 enables cash flow monitoring with comparison of predicted figures and actual figures
 provides a recognition that retail businesses do have particular cash flow problems e.g.
outlay on stock
 Time gap before products are sold.

(b) Discuss ways in which a business might improve its cash flow. [12]

causes of cash flow problems e.g. delayed debtor repayments – cash receipts slowed down –
liquidity reduced – creditors paid too early – more cash tied up in stock than is necessary.

Ways to improve might include: – factor debts (quick cash – but does not receive full debt) –
lengthen the credit period taken from supplies – leasing, sale and lease back.

6 Discuss how the objectives of stakeholder groups in a profitable business might be in

conflict. [20]

Define stakeholders

Those influenced by or influencing an organisation and its decisions. The essence of the
scenario is a successful business.

Stakeholders might be in conflict in any business – successful or not – e.g. shareholders’

interests at the expense of other stakeholders.

conflicts of interest
e.g. – shareholders want high dividends and not long term investment – managers and workers
want immediate salary increases (versus long term security) – consumers want lower prices (vs
innovation and high quality) – environment groups want more investment in the reduction of
waste and pollution, etc.

E.g distribution of profits. The relative power and influence of stakeholders is important – and
more stakeholders might be in agreement than in conflict.

Evaluation

Show the significance of a profitable business in creating conflict and/or comments on the
power/influence of respective stakeholders.

7 (a) Explain how a business might use financial rewards to motivate workers. [8]

An assumption that money is the most important motivating factor – but the question seeks
examples of how financial rewards might be used

A variety of payment schemes: time rates – wages and salaries – piece rates – payment by
results – commission – fees – fringe benefits – medical insurance – incentive schemes – sales
targets – bonus payments – productivity schemes – share ownership.

(b) Discuss why a business might use non-financial rewards to motivate its workers. [12]

Theory Y view that workers are motivated by a variety of factors and nonfinancial rewards might
be very significant – e.g. team work as well as pay – sense of involvement as well as high
productivity.

why non-financial rewards are used.

- May be a more efficient motivator.

- Recognition of worker needs and impact of motivation theory/theorists e.g. Mayo, McGregor,
Maslow, Herzberg, etc.

- The deficiencies and difficulties of using financial rewards.

Exam Tips: use motivation theory/theorists to explain the use of job enrichment/enlargement,
job rotation, team work, empowerment, etc. as alternatives or additions to financial methods.

June 2010/11
5 (a) Explain why quality control might be important for a manufacturing company. [8]
identification and scrapping of unsuitable output – the need to establish and maintain high quality
standards, particularly in flow-line production – the need to meet customer expectations – the
need to reduce costs of scrapping materials, of wasted labour time and of rectifying poor
workmanship – to prevent defective products.

(b) Discuss how a manufacturing business might achieve effective quality control. [12]
methods/approaches that aim to prevent problems, improve quality performance.
e.g. quality control inspectors, quality control charts, statistical process control, random
inspection. Credit responses that recognise that there has been a change in focus to methods of
prevention (before poor quality develops) and that such preventative approaches include the
following: TQM, Kaizen, Zero Defects, Quality Circles, Benchmarking.

Evaluation: relative strengths/advantages of different methods/approaches in a manufacturing

context.

6 Discuss how the activities of a business might be constrained by ethical issues. [20]
The increasing requirement for businesses to take into account ethical issues.
 shareholder v stakeholder
 corporate social responsibility
 accounting information – creative accounting, insider trading;
 HRM – treatment of employees;
 sales and marketing – price fixing – disinformation;
 production – pollution and carbon emission
 Intellectual property – patent infringement; international use of child labour etc.

Evaluation: recognition that ethical business activity might not be a constraint but rather a
source of competitive advantage.

7 (a) Explain the importance of the marketing function to a service business. [8]
Definition: marketing function – a process involved in identifying/anticipating and satisfying
customer requirements profitably
the concept of market-led rather than production-led operations – connection between the
marketing function and the general and specific activities of a business organisation
Exam Tips: relevance to a service business

(b) Discuss the advantages and disadvantages of niche marketing for a business. [12]

Define Niche Marketing – a business aiming a product or service at a particular, often tiny,
segment of the market
Advantages,
 small firms able to sell and exploit niche markets, avoid competition
 better focus on customer needs and gain on competitive advantage – could be very
profitable.
Disadvantages
 profitable niche markets attract competition, large businesses may join in and enjoy
economies of scale
 many niche businesses have very few products – risk increased – may be subject to big
and more frequent swings in consumer spending.

Evaluation: – Analysis of the advantages and disadvantages of niche marketing.

June 2010/13

5 (a) Explain the purposes of a Balance Sheet and a Profit and Loss Account. [8]
Explain the statutory requirement for a PLC to publish these accounts.
Balance Sheet
 The purpose(s) of a balance sheet, which is a summary and valuation of all assets,
capital,
and liabilities of a business:
 used to analyse the asset and liability structure and capital structure
 look at the value of working capital
 a guide to the overall value of a company
 a snapshot of the financial position of a company.
Profit and loss account
  The purposes of a profit and loss account might refer to the account showing how well a
company has performed at the end of a trading year
 a summary of all business transactions showing the flow of expenditure and income in a
trading period
 Allows the public to see the position and performance of the company, which helps them
to decide whether to buy shares and enables existing shareholders to assess
performance. A P & L account will include statements of gross profit

(b) Discuss how and why a business might use the straight line method to make a
depreciation provision in its final accounts. [12]
Define depreciation and the need to make provision for depreciation
 fixed assets lose value over time and provision needs to be made in the accounts each
year
 depreciation provision made each year against profits so that each year of profits bears its
share of the ‘write down’
 an annual charge against gross profits in P and L account and in the Balance Sheet the
book value is reduced each year.
 ‘Straight line method’ Formula + example
so the established depreciation cost is allocated equally to each year of the life of a fixed
asset. E.g. Cost of fixed asset = £16.000 – estimated life of 5 years and a resale value of
£6.000 –an annual depreciation provision of £2.000 will be made.
Evaluation : why and how of depreciation provision with reference to ‘straight line method’
6 Discuss the main factors that a business should consider before deciding to sell its
products on the Internet. [20]
Suggests objectives might be to increase sales –
 to supplement or replace existing sales methods.
 what the internet offers in terms of a sales facility, which would then lead into a discussion
of potential benefits and potential difficulties/disadvantages.
Benefits
 potential exposure to more people/customers on the internet
 a more global reach
 easier to place orders
 quick up-date of web-pages to reflect market conditions
 ability to be pro-active in pricing and production
  an agility and flexibility not available in. say, a catalogue.

Disadvantages
 inability to target customers so precisely as with a catalogue mailing list
 high cost of designing and maintaining a website
 possibility of technology failure
 cost of setting up a secure system of payment
 building up confidence and trust in the internet facility
 does the company have the experience to embark upon internet selling?
 Context is important – size of business, nature of products etc. – local/national/
international reach sought?

Evaluation: factors Influencing i.e. nature and size of business – experience and expertise of
internet selling.

7 (a) Explain why it is important for a business to have a motivated workforce. [8]
Advantages of a motivated workforce:
 getting full potential from workers
 increased productivity
 increased commitment
 synergy
 rich organisation culture.
A motivated work force will reduce – absenteeism, industrial disputes, falling productivity, falling
profits, managerial stress, etc. and meet worker needs.

(b) Using motivation theory, discuss the factors that might influence the level of
motivation of the workforce in a manufacturing business. [12]

The appropriateness of various motivational theories and factors that might influence a factory
workforce, e.g. how receptive might factory workers be to some theoretical approach; what is
likely to motivate factory workers?

Taylor-With emphasis on pay/money/incentives

Maslow and Herzberg-Do higher order needs exist, are motivators likely to work, etc.?
Examples: such as team work and quality circles, or piece rate systems.

Exams Tip: not all factory workers respond in the same way – “different strokes for different
folks”.

Evaluation: the complexity of motivating workers and the dangers of over simplification and
generalisation in context.

June 2011
5 (a) Explain how a business might segment its market. [8]
Segmentation is dividing a market into distinct sub-groups using either the product or the
consumer as the basis for segmentation.
 age, spending and saving habits, gender. Some products are gender influenced
(cosmetics).
 Socio-economic status e.g. income levels, tastes, leisure etc.
 National, regional, local cultural factors.
 Products can be segmented e.g. cars for safety, economy, power, capacity, price,
perceived quality.

(b) Discuss the benefits to a business of segmenting its market. [12]

Benefits:
 opportunity to identify your most and least profitable customers
 focus your marketing on those customers most likely to buy your products or services
 avoid unprofitable markets
 build loyal relationships with selected customers by offering them what they really want
 get ahead of the competition in specific parts of the market
 identify new product opportunities
 lower marketing expenses with more effective marketing campaigns
 improve competitive position and better serve targeted customers
 increase responsiveness to market demands.

Evaluation: Criticism of market segmentation (is it always positive?).

6 Discuss how cost information might be used to monitor and improve the business
performance of a large food processing company. [20]
Definition: The production, classification and interpretation of costs allows a business to analyse
the current cost situation and also trends.
Different types of cost information in relation to food processing company:

Performance issues:
 product pricing decisions
 payments for resources
 valuation of stock
 relative profitability levels of product lines
 absorption of overheads
 break-even for new products.
Raises key performance questions such as:
 cost effectiveness
 opportunity costs
 management controls to monitor costs
 cost reduction initiatives
 benchmarking with industry levels
 planning and reviewing policies to optimise performance
Cost information is at the heart of business improvement generally – in a food processing
company specific costing issues will include:
 resource costs (especially raw material costs)
 pricing of food products
 mix of machinery and staff.

Evaluation: use and importance of cost information in monitoring and improving business
performance food processing company.

7 (a) Explain the importance of human resource management to a large business. [8]
Definition HRM – using and managing staff as a strategic resource to improve business
performance to meet business objectives.
Areas of responsibility:
 o recruitment and selection
o workforce planning (e.g. redeployment, redundancy, succession planning)
o training and staff development
o appraisal
o welfare
o Consultation and negotiation.
o Staff needs, turnover, complexity of workforce etc.

(b) Discuss why the management of a hotel might decide to recruit a new head chef
externally rather than internally. [12]
Distinguish between internal and external recruitment choices
Internal recruitment has advantage of:
 candidates known to the organisation
 motivates internal staff with possibility of promotion
 less expensive to recruit internally
 possibility of ‘acting up’ etc.
External recruitment has advantage of:
 more choice for business
 there may not be any suitable internal applicants
 specialist roles may require external recruitment
 company may want to bring in new and fresh thinking and ideas and different
experience
 Opportunities to head hunt from competitors.

Internal and external are options – may depend on situation internally and the market situation
externally. In this case the head chef is a very vital role – specific expertise is required – if no
mentoring or succession planning may well have to recruit externally.

Evaluation: internal/external recruitment choice with specific reference to the context of this job.

June 2011/12
5 (a) With the aid of an appropriate diagram, explain the stages of a product life cycle. [8]
Definition: the stages through which a product passes from its initial market introduction to its
final withdrawal
 the diagram should show an appropriate shape and stages of a product life cycle:
introduction (or launch), growth, maturity (or saturation), decline
 Product life cycle can be quite short or very lengthy depending on the type of product and
on the market strategy used to sell it.

(b) Discuss how a business might use a product life cycle to plan the marketing of a
product. [12]
examine how each stage or particular stages of a product life cycle might be used to plan
marketing campaigns for particular products/services.
A marketing stimulus might be required to:
 introduce a new product into a market
 ensure steady growth
 freshen up a product in a highly competitive mature market
 manage the rate of decline (extension strategies).
May link the 4Ps or 4Cs to the stages of a product life cycle (4Cs = customer solution, cost to
customer, communication with customer, convenience to customer).
A product life cycle might be used to identify the strengths and weaknesses of a product
portfolio and indicate marketing initiatives.
Evaluation: limitations of a product life cycle approach: a fall in sales does not necessarily
indicate a product is in decline; some products hold a unique product life cycle shape; product
life cycle only a rough guide.

6 Discuss how the management of an airline might motivate its cabin crew*. You should
make reference to relevant motivation theories you have studied. [20]
Financial and non-financial motivational methods and approaches and may make reference to a
number of motivational theories in relation to cabin crew.
 pay higher than competitor airlines (industry pay is generally not high)
 incentives to sell products on the plane e.g. food/drink/’duty free’ (tax-free products)
 quality of hotels at stop-overs for rest days
 increase rest days
 attractive fringe benefits such as free or discounted flights
 develop a satisfying teamwork approach with emphasis on customer care culture.
Motivational approaches: e.g. Taylor and money, Maslow and needs, Herzberg and
hygiene/motivators, Mayo and teamwork.

Evaluation: possibility and likely impact of specific measures linked to motivation theory in
context.

7 (a) Explain the usefulness to a new business of cash flow forecasts. [8]
cash flow forecasts are a prediction of the timing and amount of cash moving in and out of a
business over a given period of time
 used to predict cash imbalances (amount and duration)
 a crucial aid to business planning – cash flow forecasts convert business strategies into
cash requirements along with an assessment of the ability to fund future expenditure
 a new business may have a weak liquidity position with small cash reserves – may need
 to pay suppliers promptly so need to plan cash flow carefully; may have a significant
overdraft
 if a new business plans for fast growth there is a danger that the business may
overstretch itself and run out of cash
 Forecasts will aid potential backers to assess financial needs and requirements of a new
business and its ability to service debts.
Exam Tip: The question is about cash flow forecast, not cash flow statements.

(b) Discuss the importance of published accounts to three stakeholder groups in

assessing the performance of a company which is planning to expand. [12]

Published accounts give quantitative results and those from the balance sheet are only a
snapshot in time.
 venture capitalists considering financing any expansion will examine existing longterm
liabilities, sales growth in recent times and net profit margins
 banks will review accounts carefully in assessing risk involved in any future lending
 competitors will take an interest in the potential capability of a business to expand, as
evidenced by the financial performance as reported
 managers will be interested in issues such as profitability, cost control, ability to service
future debt etc
  shareholders may use the accounts to calculate ratios to indicate performance levels and
capability to support expansion (risk).
Exam Tip: You may apply the same performance indicators to more than one stakeholder.
limitations of the accounts: they are historical documents, do not reflect qualitative aspects of a
business, may be subject to ‘window dressing’ and may not reflect the true performance of
individual parts of a business.

Evaluation: the importance of published accounts to 3 specific stakeholders in context of a

company planning to expand.

June 2011/13
5 (a) Explain the strengths and weaknesses of small businesses. [8]
Strengths
 offers opportunity to entrepreneurs
 little start-up money may be required
 large percentage of revenue can be converted to profit
 flexible business organisation
 quick response to customer demands
 more personalized approach
 managing the assets may not be too demanding
 Internal factors such as good internal communication, likelihood of workers feeling
‘included’ and recognised in a small organisation.
Weaknesses
 lack of capital to expand
 difficult to build a customer base
 diseconomies of small scale
 owners may lack core management skills
 customers may prefer to trade with larger established companies
 difficulty with cash flow
 External competition with large businesses.

(b) Discuss the extent to which businesses are accountable to their stakeholders. [12]
Definition stakeholders: anyone affected by a business and/or able to influence the decisions of
a business.
Accountability:
 the essence of business answerability – possibly the notion of corporate governance
 multiple levels of answerability – legal, financial, ethical; the responsibility and
requirement to account to various stakeholders, not just the wealth maximization of
shareholders
 a range of business constituencies are concerned with business performance.

The extent of this accountability depends on a number of factors:

 the activity/influence of various stakeholders and the information made available to them
 the size and nature of the business organisation – different for a plc, private limited
company, partnership, and sole trader
 extent to which mechanisms such as published accounts, annual general meetings,
annual reports are used; role of media in revealing/exposing activity; inside a business the
type and level of communication to staff, trade unions etc.
 the power of an organisation to withhold information or dress up accounts
 passivity of stakeholders etc.
Evaluation: the ‘why and how’ and the extent of stakeholder accountability.

6 Discuss the sources of finance a medium-sized limited company might use to build a
new factory. [20]
The size of the business – a medium-sized limited business – may be seen to be significant here
in that some internal sources of finance might be available, the business may not be completely
dependent on external sources of finance.

Exam Tips: overdrafts and debt factoring are not appropriate (do not accept). However, the
company may be cash rich with retained profits so internal funding may be possible.

If private limited company, funds could be injected by the owners/shareholders. However, a

conversion to a public limited company might also be a possible solution to raise substantial
amounts of capital.
If it is a public limited company, then a new share/rights issue might be a mechanism deployed.
Alternatively, substantial medium/long-term loans or lease back facilities may be sought. Current
level of liabilities will be a determining factor – possibility of government/development agency
grants.
Evaluation: (perhaps a strategy) on the suitability of sources of finance for this business.

7 (a) Explain why product promotion is important for a business. [8]

Product promotion used by a business to convince potential customers to buy a specific product
 one of the 4 Ps of marketing
 important to get the word out to target audience and present an offer and a message that
resonates
 take advantage of all various communication channels to persuade new customers to buy
and build loyalty in existing customers
 stimulate customer purchasing
 use as a competitive weapon so as to contribute directly to profitability and to differentiate
products in the market.

(b) Discuss how a retail business might increase its sales in a competitive market. [12]
Emphasis should be on HOW to increase sales:
 campaigns
 to supplement or strengthen and diversify advertising and marketing approaches
 a new focus on market segmentation (domestic/international).
 Special displays, promotional discounts, storecards/points, gift offers, increased
advertising, new pricing strategies, customer loyalty programmes, free delivery,
customer/personal service
Evaluation: a range of practical proposals to improve sales in a retail business.

June 2012
5 (a) Explain the advantages for a franchisee of a ‘franchise’ as a form of business. [8]
Franchises are a way of buying into an established business name, brand and success. The
franchisee might be organised as a sole trader, partnership, cooperative, or limited company
pays a fee for the franchise, pays royalties to the franchiser…
Benefits
 from the market position and advertising/marketing of the established business.
 may get help, advice, training from the franchiser
  examples include Body Shop, McDonalds, Pizza Hut.
 a route into business – relatively small amount of capital required
 motivation in running own business without unlimited risks
 selling a recognised product/service
 backed by successful marketing and business methods
 more likely to succeed than a single independent entrepreneur.

(b) Discuss the importance of small businesses to the economy of your country. [12]
Define small businesses, (SMEs) businesses employing less than 20/50 staff (varies between
countries) Importance might refer to:
 the value of small businesses in providing employment opportunities(Use Figures from
mauiritus)
 give opportunities for new entrepreneurs to start up.
 Governments provide start up funds and incentives to encourage small businesses to
develop and so contribute to the economy
 Small Businesses in the tertiary sector
 small businesses considered to be more creative, innovative, and flexible
 Staff more motivated.
 Provide a rich range and variety of products and services – can become national and
international organisations (e.g. software companies starting in a garage)
 Stimulate other entrepreneurial activity.
 May make a particularly important contribution to the GDP and economy of a country
 Emphasis by governments of such countries to invest in these small businesses as well
as inviting multi-national companies to come in.

Evaluation: Limitations of Small Businesses in Mauritius.

6 Discuss the usefulness to senior managers of analyzing profitability ratios and liquidity
ratios. [20]
Profitability (gross and net profit margin) and liquidity (current and acid test ratios). They might
well provide critical information for analysts and investors and/or other stakeholder groups but be
of particular use to senior managers of a company.
They indicate the success of a company to convert sales revenue into profit and over time net
profit is a good indicator of management efficiency. Indicate the short term health of a
business...ability to manage working capital...Indicate if resources are being used efficiently.

However,
 the ratios may give an incomplete analysis of a company financial position…one years
result may be of limited value…trends and inter company comparisons need to be made.
 danger of window dressing through asset valuation methods.
 qualitative results may be just as important as quantitative measures (e.g. company may
have environmental or human rights objectives).
 Senior managers will find the ratios useful in making company internal decisions and in
making
 comparisons with other companies.
Evaluative conclusion: the usefulness of profitability and liquidity ratios (with some reference to
senior managers).
7 (a) Explain and analyse the difference between ‘product orientation’ and ‘customer
orientation’. [8]
Product orientation is said to be inward looking with a focus on making products or delivering
services that have been traditionally delivered and then try to sell them…assume that there is a
market for what is being produced…the company knows best.

Customer orientation is said to be an outward looking approach where product/service decisions

are based on consumer demand as established through market research…the customer
determines what is produced…this reduces the chance of new products failing and older
products can be changed to continue their profitability. Generally assumed that only customer
orientated organisations will survive and succeed…however it can be argued that high
technology companies are providing innovative products that consumers do not yet realise that
they need!

(b) Discuss how a business in your country could assess the effectiveness of its market
research. [12]
Market research is not free…even secondary research can be costly in terms of time (if not
charged for) and primary research can be very expensive…so a company needs to know how
much is being spent on MR…if existing activities could be replaced with alternatives (perhaps
more use of the internet)…..

 how well designed and focussed is the MR?

 how closely aligned to business objectives is the MR strategy
 how regularly is it reviewed…i.e. a range of factors relating to cost need to be considered
and these compared to a more difficult assessment of the effectiveness of the MR
activities
 a crude measure might be an assumed impact on sales and/or profits, and/or market
share
 do some comparative analysis of data over a time
 period in an effort to measure impact of MR in an effort to deduce cost effectiveness. (but
how do you isolate the impact of MR activity from other internal and external influencing
factors?)
Evaluation: A more qualitative measure might be an assessment of the value of collected data
for management decision making. One key message is that measuring the cost effectiveness of
MR is not simple or easy.

June 2012/12
5 (a) Explain the advantages of a ‘co-operative’ as a form of business. [8]
Cooperatives are joint ownership organisations…..different types–producer, consumer, worker.
Exist to provide a service to their members, owners, and the public, and are a distinctive type of
business organisation. There is often a significant amount of democratic control and profits often
shared/distributed to members in proportion to investment. Consumer cooperatives generally in
Europe and Japan. Producer cooperatives common in agriculture particularly in developing
countries.
Advantages
 opportunities for joint ownership
 more employee motivation
 shared objectives
 opportunity to influence/participate in decisions,
 produce a distinctive supportive culture
 idealistic values
 strength in unity
  strength in raising investment capital
 stronger in negotiations with buyers
 more responsible to customers and community
 can be innovative.

(b) Discuss the factors that could influence the success of a small business. [12]
Define small businesses and their characteristics…(small no. of employees…small turnover…
small net profit etc.).

Factors affecting success are many (may be owner, venture or economy specific) may include:
 degree of business acumen/expertise/experience
 degree of capitalisation/undercapitalization
 quality of business objectives
 expand too fast
 quality of basic business functions and systems, e.g. planning, costing, marketing,
product development, poor/good location, poor/good internal controls (costs and cash
flow),
 level and type of competition,
 viability of business model chosen…reward particular and country specific examples.

Evaluation: appropriate success factors.

6 Discuss the uses and limitations of ‘break-even analysis’ for business decision-making.
Use an appropriate diagram in your answer. [20]

Definition of break even analysis and use a break even graph/chart to indicate the way in which
the graph/chart provides business information that might be of use to a business in taking some
key decisions (level of output at which total costs equals total revenue, where neither profit or
loss are being made, shows fixed costs, total costs, and sales revenue, and margin of safety).

Uses
 shows break even levels of production and margin of safety,
 a business can re-draw the chart to show potential new situations: e.g. a marketing
 decision to increase/decrease price,
  an operational decision to purchase new equipment which will lower variable costs.
 Charts relatively easy to construct and to interpret, allows comparisons to be made
between different options e.g. choose between two locations for a new factory or whether
to buy new equipment, or what project to invest in.
Limitations
 assumptions about cost and revenue being represented by straight lines is unrealistic
 not all variable costs change directly or smoothly with output
 labour costs might increase with maximised output (overtime)
 Not all costs can be classified conveniently into fixed and variable costs, semi variable
 costs will make the technique more complicated
 No allowance is made for inventory levels in a break even chart, it is assumed that all
units are sold.
 It is also unlikely that fixed costs will remain unchanged at different output levels up to
maximum capacity.
Evaluation: uses and limitations of break even analysis. (Evaluation may be in the form of a
balanced conclusion with a diagram.)

7 (a) Explain the benefit to an airline of using price discrimination for ticket sales. [8]
Price discrimination is the use of price elasticity knowledge to charge different prices in different
markets to maximise revenue…It is a type of pricing policy in markets where it is possible to
charge different groups of consumers different prices for the same product/service e.g. airlines,
train companies, retail urban and rural locations.
Different groups of consumers with different elasticities of demand can be kept apart and
charged differential prices e.g. children, elderly, students, families, business persons charged
different prices for the same journey, export markets segregated for differential pricing…provides
opportunities for maximizing revenue and boosting sales. (It assumes that markets can be kept
apart, admin costs can be controlled, and customers paying the higher differentiated prices do
not object and switch to competitors.)

(b) Discuss the importance of ‘branding’ for product promotion. [12]

Branding is the strategy of differentiating products/services from those of competitors by creating
an identifiable image for, and clear expectations about a product/service. It is important for
promotion in that:
  it creates images and product personalities that consumers identify with and so better
respond to advertising and sales promotions that persuade them to buy.
 Increased awareness and recognition of products/services facilitates communication with
actual or potential customers.
 Distinguishes products/services and increases chances of brand recall and repeat
purchasing.
 May allow for the establishment of a ‘family’ of branded associated products/services.
Reduces the price elasticity of demand as customers demonstrate a preference for a well
known brand and so increases customer loyalty.
Evaluation : Is the importance undermined given other changing factors such as
personal or country wide economic recession where price becomes more important
than brand image? Competition of ‘own brands’ with established brands?
June 2012/13
5 (a) Explain the strengths and weaknesses of ‘family owned’ businesses. [8]
Strengths: flexible, entrepreneurial, innovative, multi-tasking, quick decisionmaking,
long time horizons, aim is to pass on wealth, high level of trust and
commitment, loyalty, shared values, team spirit, high degree of internal control,
good lines of communication etc.

Weaknesses: lack of management experience/expertise, inflexible, role confusion, nepotism,

autocratic, lack of objectivity, family and business issues mixed up, family rivalries, innovation
stifled, lots of conflict etc…Obverse of strengths!

(b) Discuss internal growth as a way of expanding a business. [12]

Why not to pursue external growth
 avoid risks of external growth such as the merging of additional companies, culture and
work force resistance
 retain full management control through organic growth
 retain core values
 decide to use own resources and grow incrementally,
 may be at a stage of development where external growth is not possible.
Internal growth might include:
 open more outlets/divisions/branches/ in other
 towns and cities
  devolve and develop the existing business
 grow the customer base
 create new products
 increase operational efficiency.
Evaluation: Consequences expansion through internal growth.

6 A private limited company wants to build a new factory. Discuss the factors that the
company should consider when choosing sources of finance. [20]
 what is the level of retained profit?
 what are the resources of existing shareholders in this private limited company?
 what is the existing debt situation of the company?
 are the existing directors willing to consider floating the company on the stock exchange?

the limitations and opportunities of a private limited company in identifying factors and source
options and apply the identified factors to options such as:
float the company into a full stock exchange listing
take out a substantial loan
use retained profits and raise finance from existing shareholders
seek out venture capital.
Exam Tip: speculate on the size of the sum needed to build a new factory.
Evaluation: factors influencing the choice (perhaps making a judgement on the most important
factor(s)).

7 (a) Explain why ‘customer relations’ is important for a retail business. [8]
Customers are vital to the survival of commercial businesses-- and customer/client relationships
are recognised to be significant for retail businesses where customers interact with the business
on a very regular basis and in a very competitive environment
 some businesses adopt a producer focus rather than a customer focus – important that
customer/client needs and expectations are identified and satisfied
 there is likely an impact on the bottom line in terms of reputation and customer loyalty
 a company obsessed with customer concerns likely to stand out
 develops a competitive edge – a USP
 the distinctive customer culture spills over into the customer experience and contributes to
 business success.
(b) Discuss how a retail business might improve its ‘customer relations’. [12]
Answers:
 better communication with customers
 seek customer feedback
 set up focus groups
 interview customers,
 more generally identify marketing, promotional, advertising strategies to better connect
with customers.
 focus on staff in a retail store to improve customer relations
 build a customer focussed culture, training, recruitment and selection focus on customer
friendly staff.
Evaluation: practical proposals to improve customer relations in a retail business.

June 2013/11
5 (a) Explain why the marketing objectives of a business need to be closely linked to its
corporate objectives. [8]
A close alignment is vital as:
 Corporate objectives such as profit maximisation, growth, market share, CSR, survival,
provide a clear guide for business action and strategy.
 The marketing objectives and strategy are designed to support and achieve the corporate
objectives.
 A business in pursuit of short term profit targets will require sales to be maximised at
highest prices possible.
 A business in pursuit of longer-term profit objectives may adopt a ‘societal marketing’
approach to incorporate CSR.
 So marketing objectives need to fit with overall aims and mission of a business.

(b) A business designs and manufactures mobile (cell) phones. Discuss why portfolio
analysis could be important if the business is to achieve its marketing objectives. [12]
Product portfolio analysis is said to be important in achieving marketing objectives as:
 increase market share
 increase total sales,
  product development
 rebrand products
 the product portfolio needs to be understood and regularly analysed.

– In a highly competitive area such as cell phone manufacture and design, it is vital that the
width and depth of the product mix is regularly considered.
– The aim is to review the ‘optimal product mix’ in the light of current marketing strengths,
potential demand estimates, resource issues, and the general market environment.
– The benefits of product portfolio analysis are said to be the opportunity to identify market
strengths, weaknesses, with a view to improve performance.
Exams Tips: This is a question of WHY portfolio analysis rather than HOW.
Evaluation: the importance of product portfolio analysis in context.

6 Discuss the view that a ‘leader’ should set a clear direction and vision for an
organisation, whereas a ‘manager’ should control and allocate resources. [20]
This view suggests that the roles of ‘Leader’ and ‘Manager’ in an organisation are quite
distinctive
and different. The discussion could raise the following issues.
– The distinction is between a ‘passive’ manager and a ‘dynamic’ leader and that they are two
very different roles/functions.
– The leadership role can be put in a context of charismatic characteristics that inspire,
motivate, win hearts, break new ground, achieve organisational purpose and objectives.
Reference may be made to leadership theory and leadership roles.
– The management role might be discussed in terms of objectives, planning, co-ordinating,
controlling and motivating – with some reference to theory such as Mintzberg.
– Answers may well argue that good leaders can be bad managers, and good managers can
also be very effective leaders.
– The theory of leadership and management suggests distinctive functions but also
overlapping responsibilities and opportunities.
Evaluative discussion that clearly addresses the roles/functions of leaders and
managers and seeks to unpack the assumptions in the question.

7 (a) Explain why a business environment might be described as dynamic. [8]

(a) A business environment may be described as dynamic in that:
– It is rarely static – the nature of business and markets suggests volatility and turbulence.
– Legislative/governmental influences change from time to time.
– Economic and social movements affect demand and supply.
– Technology is ever changing making new opportunities and threats.
– Local, national, international competition develops and changes.
– A business may be a part of the change dynamic, as well as needing to react to change
initiated by other factors.
– Financial factors often influential, currencies, exchange rates etc. – credit relevant
environmental change factors identified.

(b) Discuss the view that the only purpose of private sector businesses is to make profit,
not to pursue corporate responsibility objectives. [12]
The view that business should focus solely on making profit and not be diverted into
corporate (social) responsibility objectives might comment on the following:
– More profit will allow a ‘trickle down’ effect and supply the resources to deal with social
issues.
– Entrepreneurs and managers should maintain a clear focus on ‘bottom line’ issues – play
to their strengths.
– Markets and prices are distorted – let businesses and markets do what they do best.
– Alternatively it is argued that the social cost of profit focus alone is too high.
– It is possible and necessary to combine profit pursuit with socially responsible business
practices.
– It is vital to continually assess the impact of business activity on the environment and to
require more responsible action.
– Corporate social responsibility is often now seen as an essential part of reputation
management and can act as a competitive advantage.
Some evaluative comment on the relative significance of profit maximisation
and corporate responsibility.

June 2013/12
5 (a) Explain the potential benefit to a business if employees are involved in the decision-
making process. [8]
The benefits to a business through employee involvement will likely cover issues such as:
– The context is staff involvement, participation, feedback, lots of information/
communication – a democratic approach.
– Staff expected to contribute fully – e.g. suggestions/quality circles.
– New solutions expected.
– In the process higher order needs of staff satisfied.
– Change likely to be better accepted and managed.
– High staff motivation and business is more productive.
– Depends very much on the experience and degree of responsibility staff prepared to
accept, together with quality/sensitivity of management.

(b) Discuss the possible impact on the motivation of employees in a hotel of the
appointment of a General Manager who introduces an autocratic leadership style. [12]

The likely impact of an autocratic style of leadership may address the following:
– Context and meaning of autocratic leadership is explained – the leader takes most
decisions – little information to staff – close supervision – little staff involvement.
– Application of autocratic style to specific hotel situations – the style may be considered to
be appropriate for some stuff, e.g. room maids, kitchen and cleaning staff (potentially
controversial!) and purchasing.
– Style may be considered less appropriate to other staff, e.g. front of house staff,
marketing, finance, etc. so for some staff the impact may be demotivating but for others
it may give them additional incentives to perform.
– Some relevant motivation theory/theorists may be suggested as evidence.
Evaluative comment on the problematic nature of any impact, given the variety of staff and
functions in a hotel.

6 Discuss whether technological developments offer more threats than opportunities for
operations decisions made by businesses in your country. [20]

The discussion of threats and opportunities as a result of technology is directly related to

operations and project management but some perceptive candidates might well consider its
impact on other business areas, e.g. marketing methods, HR methods, financial methods.
Answers that focus on operations might discuss the following:
– CAD and CAM – allowing quicker new product development, and streamlined robotic
machinery – cost saving – innovation – flexibility – linked to supplies.
– IT developments – speed, accuracy, over all departments.
– Internet – worldwide marketing, communication, intranets.
All of the above offer significant opportunities for many businesses. Threats also exist:
– Internal threats – staff reduction, de-skilling
– External threats – new technology may facilitate outsourcing and transfer of production to
more cost-effective international areas.
– It may all depend on the particular type and impact of technology, and on the specific nature
of the business and its operations.
– The country context is then added to these factors.
Evaluative discussion of potential threats and opportunities for operational decisions of specific
technological examples in a country context.

7 (a) Explain why a luxury car manufacturer should consider both the tangible and
intangible attributes of its products. [8]

A product may be more than the sum of its physical parts:

– The tangible ‘bells and whistles’ of a product, such as distinctive features, quality levels,
functionalities may be an insufficient measure of worth and value.
– A product may have significant intangible attributes which may add considerable asset
value to the balance sheet of a company.
– Intangibles such as reputation, goodwill, established brand, patents, copyright, can be
items of significant value but they do not have a physical presence.
– For some industries, e.g. music, publishing, scientific research, luxury cars, these
intangibles may be a significant source of asset value.

(b) Discuss the advantages and disadvantages of using extension strategies to lengthen
the life of a product. [12]

– The ability and opportunity to extend the life of a product depends, of course, on how
strong consumer associations with the brand are.
– It is potentially cost-effective in that it delays the need for potentially expensive launch of
new products.
– It can stretch a brand and identity and achieve new sales revenue, e.g. Ralph Lauren
brand extended from clothes to home furnishing (Virgin).
– Extensions can lead to diversification, not just extending the life of a product.
– It reduces risk by exploiting the brand name to enhance the consumer perception of
brand equity.
– So potentially significant benefits – increased profitability.
– Also potentially significant risks with brand extension.
– Can, with bad decisions, dilute and/or damage the wider brand and its equity – through a
flawed production extension.
– The product may not be amenable to an extension strategy and resources could be
wasted.
– The extension strategy might not be well thought out.
– There is a high rate of failure for extending/stretching brands.
– It can cause uncertainty in the mind of the consumer.
– May lead to ‘over extension’ where the ‘new’ attributes are hardly noticeable.
Some evaluative comment on advantage and disadvantages of extension strategies.

June 2013/13
5 (a) Explain why a Marketing Director needs to understand price elasticity of demand. [8]
PED is important for a Director of Marketing in that:
– Price is a key part of the marketing mix and pricing decisions need to be right for
business success.
– PED is a measure of the responsiveness of demand following a change in price and is a
potentially significant issue to consider when fixing/changing prices.
– PED facilitates making more accurate sales forecasts if, for example, production costs
necessitate a price increase.
– Assists in making pricing decisions – where and by how much to change.
– So a vital analytical tool/concept in pricing decisions.

(b) A new bus company has decided to enter a highly competitive city centre transport
market. Discuss the factors that the company needs to consider when deciding on its
pricing strategy. [12]

The factors that need to be considered could include:

– Reviewing the short-term and long-term objectives
– Costs of production – running the buses – do they need to be covered in the short-term if
market share is established? (Price penetration?)
– How strong is the competition? – Loss leader pricing.
– Is it possible to segment the market and focus on a few potentially profitable ranks? –
Price discrimination.
– Product differentiation – better quality busses – more flexible timetables etc. – may be as
important as the price.
– Pricing methods are relevant and should be rewarded but they need to be presented in
terms of pricing strategy options and marketing mix options rather than just a list of
pricing methods.
Some evaluative comment on pricing strategy issues in context.

6 Discuss the factors a Human Resources Director could consider when seeking to
improve staff morale. [20]

After attempting some definition of staff morale – the spirit of a company’s workforce – the
degree
of trust and confidence held, support for company objectives/management/leadership – poor
productivity, lack of loyalty, absenteeism.
– Needs to analyse and understand where staff morale is low and needs improving
(information and data may well exist within HR department if it is efficient!)
– Recognition that many factors impact on staff morale (external and internal) – internal factors
are the likely ones HR need to focus on, e.g. uncertainty, rumour, poor results, poor quality
products/services, poor management and leadership, poor marketing etc.
– Depending on the data and the quality of analysis, HR need to find some sustainable
initiatives to make an improvement in staff morale.
– How to change from negative to positive – from despair to confidence.
– E.g. – Build trust
– Root out poor management
– Plan for some ‘early wins’
– Engage the staff
– Improved service conditions
– Training and development
– Review intrinsic and extrinsic reward systems
– Review organisational structure and levels of responsibility etc.
– An evaluative response might address the feasibility of a substantial or a sustainable
increase in staff morale.
An evaluative discussion of some relevant factors and issues that could be used to improve staff
morale.

7 (a) Explain the likely conflict between the ‘triple bottom line’ objectives of a social
enterprise operating in your country. [8]

‘The triple bottom line’ is the definition of the objectives of a social enterprise organisation –
economic, social and environmental. It is said to be a challenge in that:
– The focus of a triple bottom line business is broader than a simple profit-making
organisation and a Social Enterprise is a business that seeks to make money in socially
responsible ways through the pursuit of three primary objectives: economic, social,
environmental. As well as making money in a socially responsible way Social
Enterprises often seek to invest any surplus (profit) into society.
A Social Enterprise organisation, like other organisations, often has to make decisions
based on multiple and sometimes conflicting/competing objectives but the focus will be
on the ‘triple bottom line’.
The 3 ‘triple bottom line’ objectives are: 1. Economic – make a profit and survive. 2.
Social – ensure the well-being of people/employees, disadvantaged in the community,
customers etc. 3. Environmental – protecting the environment and managing the
business in an environmentally sustainable way.
There may well be tensions/conflicts between the 3 primary objectives of a Social
Enterprise. Perhaps the most notable tension is often caused by the need for a Social
Enterprise to remain economically viable and sustainable – being efficient, productive,
and profitable as it seeks to achieve its social and environmental objectives. There may
well be tensions and conflicts within each of the 3 objectives for example establishing
priorities for social and environmental objectives.

(b) Discuss the role business entrepreneurs could play in the future development of your
country. [12]

The discussion is likely to refer to the contribution business entrepreneurs might make to a
country in terms of the business enterprise culture and activities they bring or develop. An
initial explanation of entrepreneurial characteristics may follow with an emphasis on risk
taking, innovation, creating and strengthening business ventures, and generally improving
the national business enterprise culture and performance.
The contribution they make or may make to the future development of a country is likely to
depend on factors such as:
– The stage of development (economic) that a country is presently in
– The quality of the skills of the entrepreneurs.
– The support and encouragement given to the entrepreneurs by the government of a
country.
– The external issues that may affect a country in the future, given a dynamic and political
external environment.
The role of business entrepreneurs could include activities such as:
– Stimulating business enterprise in whatever form as the engine of economic progress
and development.
– Support infrastructure development and progress.
– Create jobs – multiplies effect on economy.
– Fostering entrepreneurial spirit – innovation – change.
– Creating opportunities for funding – taking advantage perhaps of international funding
and support.
– Entering into partnerships with government-funded structures and organisations.
– Educating people of the potential benefits of market activity and private sector
commerce.
Some evaluative comment on the role of business entrepreneurs in the future development
of a country.

June 2014/11
5 (a) Explain the differences between the motivation theories of Maslow and Herzberg. [8]
• Maslow essentially concerned with identifying and classifying human needs.
• Application to the work organisation is the presumption that satisfied needs at work lead
to greater productivity.
• Hierarchy of needs – from physical needs to self-actualised needs.
• Herzberg – focus on a two-factor theory.
• Hygiene factors (e.g. working conditions, salary), extrinsic factors can cause
dissatisfaction – these need to be removed but satisfaction with hygiene factors will not
necessarily create a motivated workforce. Motivating factors – intrinsic factors – are the
key to productivity (achievement, recognition, responsibility).

(b) Discuss the view that a successful business needs both effective managers and
effective leaders. [12]
• Discussion should distinguish between managers and leaders.
• Managers said to deal with the ‘now’ – set objectives, plan, co-ordinate, motivate, direct
and control (Mintzberg classification may be cited).
• Leaders – said to be more about the future – giving clear direction, and vision and
purpose for an organisation.
• Each requiring different qualities and skills.
• Arguably successful organisations need both effective managers and leaders – they can
be the same people – but not necessarily!
• Accept a discussion of the concept of informal leaders.

6 Discuss the usefulness and limitations of published accounts for business stakeholders
in measuring the performance of a company. [20]
• Published accounts are financial records of business transactions which provide essential
information to groups within and externally to a business (e.g., internal managers, staff,
shareholders, banks, etc.).
• Published accounts give information on profitability, value of fixed assets, liquidity,
growth/investment potential.
• Interested stakeholders may use accounts and examine performance indicators such as net
profit margin, level of sales, long-term liabilities. These provide indicators of performance and
financial stability/strength – more than one year’s accounts may be examined.
• While of potential value to an interested stakeholder, published accounts have limitations:
○ contain only information required by law
○ it is historic information
○ do not give details of each section of the business
○ may not include future budgets or financial plans
○ there may be ‘window dressing’
○ qualitative factors such as internal health of the business not in the remit of published
accounts.
Evaluative discussion of the usefulness and limitations of published accounts for
measuring business performance.

7 (a) Explain the differences between batch production and flow production methods. [8]
Batch production – a single product made in batches to an individual specification –
production process divided into a number of different stages – each operation at each stage
carried out in a batch, e.g. there is a demand for 500 bread rolls – allows each batch to be
matched to a specific demand specification – flexible and some economies of scale if large
batches.
Flow production – mass production of identical standardised products – continuous
sequence of a range of different operations – large quantities produced – automatic – lower
unit costs – semi-skilled workers required.
(b) Discuss the implications for a manufacturing business of changing from batch
production to flow production. [12]
• Discussion could well focus on the explanations/definitions given in 7 (a).
• Factors that could affect a business as it moves from batch production to flow
production:
○ new machinery/technology – cost implications.
○ impact on staff – redundancy implications.
○ impact on morale/motivation of staff.
○ implications for inventory requirements.
○ impact on unit costs.
○ impact on quality standards of products.
○ the need to plan and manage this change.
○ impact on consumer – standardised products.
• The effect of these factors and implications for the business also determined by the
context of the business and its products, e.g. existing levels of automation, the industrial
relations situation, the managerial competency within the business.
Evaluative comment on the implications/factors involved in this production change.

June 2014/12
5 (a) Explain the differences between McGregor’s ‘Theory X’ and ‘Theory Y’. [8]
– Theory X and Theory Y are concerned with the attitude of managers to their workers.
– Theory X managers see workers as lazy, disliking work, unprepared to accept
responsibility, needing close control and supervision.
– Theory Y managers see staff as enjoying work, they can be creative and will accept
responsibility, and contribute to decision-making.
– The impact of either approach on workers is significant.
– It leads to different kinds of management/leadership and different reactions.
NB to examiners: Candidates who only look at the theories from the point of view of worker
attitude or types of worker should not be penalised. This is an acceptable interpretation.

(b) Discuss the benefits of team working for production workers and managers. [12]
The benefits of team working are said to be:
– While working in isolation is sometimes appropriate and successful, it is argued that
working in teams can lead to high performance activity.
– For employees, team working provides an opportunity to form relationships with other
employees – share tasks – multi-task – more motivation – more involvement – more
ideas – more sense of ownership – job enrichment through teams being given complete
tasks.
– For managers, less need for close supervision – happier employees – more productive
ideas – better quality work (quality circles) – reduce management costs (de-layer the
organisation).
– Recognition that producing high performance team work is not easy.
• Evaluative comment on team working benefits for workers and managers in
context.

6 Discuss how a cell (mobile) phone manufacturer could assess the effectiveness of its
market research expenditure. [20]
– Market research is the process of collecting, recording and analysing data about customers,
competitors, and the market.
– There are various types/methods of research – and it can be very expensive.
– Measures of effectiveness can only be carried out after the research has been gathered,
analysed and used in management decisions – and are problematic.
– Measures can include:
○ contribution to sales growth.
○ contribution to net profit.
○ contribution to product design/re-design.
○ increase in market share.
○ successful targeting of marketing.
○ increased recognition of the brand.
○ the extent of success in launching a new product.
NB Measures of effectiveness of MR expenditure may not of course always be positive – extent
of failure could be measured.

– Measuring the ROI for market research is probably as much qualitative as it is quantitative.
– The context of cell phone manufacturing raises issues such as the extent to which the
manufacturer has been able to plan, change product design to meet the changing
competitive context and consumer aspirations.
• Evaluative comment on devising/using measures to identify the effectiveness of
market research expenditure in context.

7 (a) Explain how the effectiveness of the operations management function can be
influenced by human resource management. [8]

– Operations management decisions involve making effective use of resources (inputs),

land, labour and capital to provide outputs in the form of goods and services the
transformation process.
– Operations management and planning is concerned with:
○ which resources are needed to complete the production/service process.
○ how the work/process will be organised and scheduled.
○ who will perform the work.
– Clearly human resource management is a critical factor in efficient and effective
operational management processes. People management decisions (HRM) will include
issues such as recruitment/selection of appropriate staff for operational efficiency –
quality of staff, skills, competences of staff, training and development of staff are all
critical aspects of efficient operations management and planning.
The impact of HRM, generally on the motivation of staff, on the culture of the
organisation, and more specifically on the motivation and culture of the operations
management department/division.
(b) Discuss how the actions of competitors could influence the operations management
decisions of a car manufacturer. [12]
Answers may well describe and define the role of operations management – the concern with
effectively transforming inputs into outputs – producing final products (in this case cars)
which satisfy consumer demands and so contribute to the profitability and sustainability of
the manufacturer. Key operational decisions are made – what to produce, how to produce,
where to produce.
The actions of competitors may well create new market scenarios that require reaction and
response. Competitor actions could include: improvements in design, in quality, in cost
reduction, improved customer service, new and innovative models, more attractive pricing
offers.
An operations management department will need to respond to such changing situations and
might include:
○ developing a new/improved computer aided design and/or production process
○ a focus on higher quality
○ more ‘bells and whistles’ on cars
○ develop a more efficient production platform process (including possibility of outsourcing)
○ innovation in product range and models
○ more efficient distribution channels (logistics)
○ more efficiency / cost-cutting
• Evaluative comment on the influence of competitors on operational
management decisions in context.

Nov 2010/11

5 (a) Explain the differences between autocratic and democratic leadership. [8]
Explanation could include explicit definition of autocratic leadership – sole decision-making –
subordinates informed and carry out decisions – leader sets out objectives – allocates tasks
– insists on obedience – concentration of power and authority. Democratic leadership
encourages participation in decision-making – consultative – can be time-consuming – loss
of control – but potentially more motivating. Sound answers will recognise that the difference
is not always as stark as these rather simplistic definitions suggest – depends on context and
character of leader.

(b) Discuss the view that a democratic style of leadership is the most effective leadership
style for a business in the competitive business environment of today. [12]

Discussion could examine and analyse the suggestion that a democratic style of leadership
may be more effective in business for the following reasons: democratic leadership reflects
the growing participation in social and public life – people now expect more freedom and
better quality of working life – managers able to tap into ideas of knowledgeable workers –
people more committed and motivated – ready to accept decisions – etc. Strong answers will
recognise that this ‘view’ is not always applicable and is a generalisation.
• Evaluative comment on the word effective, or critique of the ‘accepted’ advantages of
democratic leadership, or explicit connection to the idea of a 21st century business and
its demands.

6 Discuss the benefits to a business of setting ethical objectives. [20]

Discussion could include a definition of ethical objectives – ‘right and proper’ approach to
business decisions and actions – with examples in relation to pollution, treatment of staff,
suppliers, environmental issues and the potential impact of distinctive values and beliefs of a
company on its actions.
Potential impact of ethical objectives and behaviour on securing greater market share/
profitability/image/reputation might include: marketing and publicity benefits of the perception of
being ethical – high reputation say for treating an international supplier fairly and ensuring ethical
standards by that supplier – customer perception nationally and internationally – unique selling
point (USP) all help to enhance market share. (Some may point at the potential extra costs and
the need to balance costs and benefits of ethical objective-setting.)
• Evaluative comment on the potential impact of ethical objectives on perceived performance
and activity of a business.

7 (a) Explain the differences between ‘payback’ and ‘average rate of return’ as methods of
investment appraisal. [8]
Explanation could include: definition of ‘payback’ – the length of time it takes for a business
to recoup its original investment outlay – simple to use – based on the speed of repayment –
estimates net income flow – has its limitations – cash earned after the payback is not taken
into account and profitability of a project is ignored. ‘Average rate of return’ shows average
return per year as a percentage of the initial cost: net return (profit) per annum ÷ capital
outlay (cost) × 100. This technique shows clearly the profitability of an investment project –
easier to identify the opportunity cost of investment and to compare the overall rate of return
with other uses for investment funds. It does not, however, take into account the effect of
time on the value of money. Both identified as quantitative methods of investment appraisal.

(b) To what extent should investment decisions be made using only quantitative
information? [12]

Discussion could recognise that investment appraisal relies mainly on quantitative factors
and methods but that qualitative factors must also be considered. Indeed non-quantitative
factors could undermine or significantly influence quantitative predictions or speculation.
Qualitative data include: reputation damage caused by switching to a low-cost supplier –
state of business confidence – macro state of domestic/world economies, levels of inflation,
government measures.
Quantitative factors provide a numerical basis for decision-making but other factors need to
be taken into account, such as investing in wind turbines in a coastal area might be justified
on financial grounds but qualitative factors might be important – e.g. reaction of local
community – fit with government policy – social impact of noise, damage to ecosystems –
impact of decisions on stakeholders – long-term v short-term impact – alignment with
corporate objectives – ethical considerations – industrial relations.
• Some evaluative comment on the significance of qualitative factors in influencing
investment decisions – relative to quantitative factors.

Nov 2010/12
5 (a) Explain the differences between batch and flow production methods. [8]
Explanation will make clear the difference – Batch production – a single product made in
batches to individual specification without a continuous flow production process – e.g. the
production process divided into a number of different operations and such operations carried
out on all products in a batch – the batch then moves on to the next operation – products can
be produced in large or small batches – allows flexibility to customer needs – uses more
standardised machinery than job production – allows employees to concentrate on one
specific operation at a time – requires careful planning and co-ordination – time required to
set up and start up machinery – unit costs can be high if batches are small – money tied up
in work in progress. Flow production – mass production of identical standardised products –
continuous sequence of a range of different operations – large quantities produced – semiskilled
workforce required – unit costs reduced – high level of automation so set-up costs
high – impact on worker motivation-costs of flow interruptions.

(b) Discuss the implications for a manufacturer as it switches products from batch
production to continuous flow production. [12]
The discussion will likely build on the definition given in section (a) and unpack the
operational characteristics of the two methods of production, e.g. the move to flow production
for products implies:
– more machines/technology required (cost implications)
– impact on ability to meet customers’ needs in terms of more standardised products –
less flexibility (presumably the decision to change has taken this into account)
– implications for raw material stock (larger stock required?)
– opportunity to achieve more consistent quality standards
– reduce unit costs
– redundancy implications
– impact on worker morale – repetitive work
– so a range of issues and implications to be considered and managed. The extent and
type of these very much depend on the nature of the products, the position of the
business in terms of existing levels of automation – the industrial relations situation –
capacity and competency of the business – contextual variables.
• Evaluative reference to the contextual situation of any business embarking on this
change to flow production.

6 Discuss the usefulness of published company accounts in measuring the success of a

business. [20]

The discussion might well focus initially on unpacking or describing the component parts of
company accounts such as P and L and Balance Sheets.
Given this outline, the discussion could then identify a number of measures that are considered
to
be relevant for assessing business success, i.e. performance indicators (quantitative) such as
net
profit margin – level of sales – stock levels – long term liabilities – value of assets – level of
debtors. Some analysis of the value of these indicators might be given, together with a
recognition of the limitations of purely quantitative indicators set out in published accounts – i.e.
numbers may be imperfect or incomplete, trends not shown and such factors or reputation,
market share and health of the organisation culture are outside the remit of the accounts.
• Evaluative reference to usefulness and/or meaning of success added to sound analysis of
appropriate financial indicators.

7 (a) Explain the benefits to a workforce that might result from job enrichment. [8]

Explanation could initially define the concept of job enrichment – giving employees greater
responsibility and recognition – extending their role – coming out of Theory Y expectations of
McGregor – the vertical extension of a job – (e.g. responsibility for planning a task, quality
control activity – work supervision).
Benefits for the individual worker include vote of confidence in worker so esteem needs met
– developing potential/undeveloped skills – more varied tasks – possibility of promotion.
Reference may also be made to the downside of such initiatives – employees may not
respond – union concerns – more likely to be successful in admin/technical positions than in,
say, factory work – depends on the context.
• Analysis of relevant benefits that might result from job enrichment.

(b) Discuss arguments for and against the introduction of more delegation in a business.
[12]
Discussion might well initially define the concept of delegation – passing down certain power
and authority to subordinates – the dispersal of authority – perhaps mention of the key
principles of delegation – responsibility – authority and accountability.
Arguments for might refer to:
– opportunity to empower and motivate workers
– reduce stress and pressure on more senior managers
– free up time for more senior managers to concentrate on more important tasks
– subordinates better informed about operations
– greater flexibility and quicker response to change situations
– grooms middle and junior levels for promotion
Arguments against might refer to:
– fear of and actual loss of control by those who delegate
– potential loss of strategic direction and coordination
– less skilful/expert decision makers
– workers unwilling to accept delegated power and authority
– managers unwilling/unable to delegate
Balance of advantage very much depends on the context – the readiness of the organisation
and the employees for a system of delegation and the quality of the delegation made.
• Some evaluative comment re the balance between advantages and disadvantages – i.e.
contextual issues.

Nov 2010/13
5 (a) Explain the differences between McGregor’s ‘Theory X’ and ‘Theory Y’ business
managers. [8]

Explanations could focus on the assumptions made by Theory X and Theory Y managers as
to how workers view work – the contrast between workers who don’t like working need to be
told what to do, can’t be trusted etc and those who enjoy work will work independently and
are trustworthy. How managers respond to these different workers.
• An analysis of the difference, with explicit reference to the PRACTICE of management
influenced by Theory X and Theory Y assumptions.

(b) Discuss the benefits of successful delegation for managers and workers. [12]

Answers could initially define delegation – pass down certain duties/powers to subordinate
colleagues with resulting benefits to giver and receiver. Value to manager is more time to
focus on more demanding tasks – reduces stress – for the worker it might mean
empowerment, job satisfaction and enhanced motivation. Some answers might address the
assumption of successful delegation.
• Attempt at evaluative comment relating, say, to ‘successful’ delegation, e.g. comment
relating to possibility of successful delegation becoming less successful or to difficulties/
problems of securing benefits.
6 Discuss possible benefits and limitations of market research for a car manufacturer. [20]

Discussion might include an initial definition of market research – information collected to satisfy
customer needs – to determine consumer wants and needs – the collection and analysis of data
relating to the marketing and consumption of goods and services – the collection of information
about what consumers want and are prepared to pay for – applied to a car manufacturer – (e.g.
coffee cup holders in a car, satnav systems) – information that will inform decisions in production
and promotion.
Benefits could refer to the value for decision-makers – more informed decisions – faster and
more sensitive decisions related to market situation – reduce risk to producers as a new car is
planned or launched – stop waste of resources – reduce the number of failed product
innovations
– establish strong links with customers – give more precise information on market segments –
good for PR and image projection – establish and maintain brand loyalty.
Limitations – data not always reliable – high percentage of all new products still fail – difficult to
assess the value of market research, which may well be expensive – poor methods might be
used – primary research samples may be biased – customer behaviour is unpredictable –
secondary data may not be particularly relevant. Any focus on the specific methods and
techniques of market research should be contextualised, with obvious reference to a car
manufacturer.
• Evaluative comment that analyses benefits and limitations of market research and has
an explicit reference to a car manufacturer.

7 (a) Discuss the importance of effective stock management to a business. [12]

Discussion to include a review of the necessity and importance of effective stock

management – reference to the benefits – the minimisation of stockholding costs – the
reduction of spoilage etc, the opportunity cost of poor management – the achievement of
business objectives – the satisfaction of customer demands – the establishment and
maintenance of business reputation. – Examples of particular business might be given, e.g.
the importance and necessity for a retailer – danger of empty shelves, obsolescent stock,
inability to support marketing and advertising claims.
• Some evaluative comment on the value of effective stock management and the cost of
non-effective stock management – an organisational necessity if significant objectives
are to be achieved.

(b) Explain how JIT (just in time) could be used to manage stock in a retailing business.
[8]

Explanation to define JIT initially– a manufacturing organisation philosophy decreasing waste

by supplying parts only when they are required in an assembly process – now applied to a
range of production and distribution processes.
Retail has made particular use of JIT (e.g. Tesco) as the supply chain is vital for the success
of the retail business – vital that products are distributed and supplied at right time – efficient
management of re-order lead time is vital – JIT has developed with IT developments into
continuous product replenishment (CPR) and Vendor-managed inventories – so variations
on the JIT approach at the heart of efficient retail stock management.
• Analysis of JIT and its relevance for effective stock management, with some reference to
retail business.

Nov 2011/12

5 (a) Explain the possible advantages to a business of autocratic leadership. [8]

Top-down, directive, full control leadership with little employee input. Often compared

unfavourably with democratic leadership but arguably has advantages and in appropriate

contexts is potentially very effective:

• in military and other crisis situations (fire and rescue, police)

• in times of stress and emergency, an autocratic style may well be best style to adopt

• staff need to be told exactly what to do and when to do it.

Focus on the task rather than on suggestions of ways to perform. Businesses that focus on

the task can develop a competitive advantage through increased productivity. Groups/teams

often require authoritative leadership to perform effectively and autocratic direction and

leadership is sometimes necessary.

(b) Discuss the qualities of an effective business leader. [12]

The question is about business leaders. Strong answers will do more than simply outline
some basic management roles and functions. Effective leaders may or may not be good
managers. They are described, however, as having a number of distinctive roles, e.g.:
• to give strategic direction
• to inspire others
• to shape and build organisations
• to communicate well
• to have a holistic concern for the organisation (see the big picture, think the big ideas)
• to be resilient
• to be sensitive/emotionally intelligent
• to be willing to make unpopular decisions etc.
Reward any sensible quality that clearly relates to the role of leader.
Evaluative comment on the sound business leadership qualities proposed.

6 Discuss how the ethical decisions of a large clothing retailer might help or hinder its
business performance. [20]

Answers might initially define ethical business decisions – ‘right and proper’ decisions in a
business context. There may well be moral judgements to be made and moral dilemmas to face
in the retail clothing context. Key issues are the sourcing of raw materials and the production
process in distant lands.
The advantages of an ethical stance include:
• reputation
• marketing and publicity benefits of establishing and communicating the high moral stance
taken
• competitive advantage perhaps gained
• impact on the internal culture of the retailer encouraging pride in the company.
The disadvantages of an ethical stance may include:
• costs may increase, a potential disadvantage compared with competitors
• reduced opportunity of overseas outsourcing
• more close control of suppliers required but is such control possible anyway?
Question gives opportunity to balance out both sides of the debate: ‘ethical or not?’ or ‘what
degree of ethical behaviour?’
Evaluative comment on the ethical choices and consequences for a large clothing retailer facing
ethical dilemmas and problems.
7 (a) Explain the usefulness of the ‘product life cycle’ for a marketing manager. [8]

Answers may initially define the product life cycle concept – the stages a product is said to
pass through. Possible uses include:
• one of the tools a business may use for marketing plans and strategies – identify where
a product sits in the life cycle and apply marketing expenditure accordingly
• an important tool in managing a product portfolio and mix
• indicates broad trends in revenue that a product might earn for a business
• identifies points at which a business may need to launch new products or engage in
extension strategies
• allows a business to plan different types of marketing for different products – a key tool
for a marketing manager.

(b) Discuss the advantages and disadvantages for a cinema of setting up a website to
market its services. [12]

Initially perhaps some general comments on the increasing business use of websites to carry
out significant marketing operations – advertising, promotion, selling, branding etc.
With reference to a cinema, there are some clear potential advantages:
• websites are powerful assets for business to connect with existing and potential
customers
• find out information on film showings, admission prices, book seats in advance,
information and reviews of current and future films
• encourages more business, special offers, previews and film premier showings
• target age range that is familiar with the Internet.
Potential disadvantages are:
• extra costs (additional to more traditional methods of advertising and promotion?) –
initially costly to set up
• costly to maintain – may need to buy in the expertise
• may have no choice if competitors have already moved in this direction.
Some evaluative comment on some well-explained business implications of moving to online
advertising in context of cinema.

Nov 2011/13

5 (a) Explain how technology has influenced the marketing activities of businesses. [8]
Technology has:
• given power to customers, who can choose when and how they want marketing
messages (or if they want them at all)
• given a vast array of new media options to marketing professionals
• increased the reach and targeting power of marketing – Internet, ipods, blogging, mobile
technology
• changed how brands are built and managed – brand loyalties once assumed to be
givens challenged with consumer access to competitive information through new
technology channels
• measurement of marketing impact can now be more readily quantified
• marketing landscape more complex, requiring more flexible and innovative marketing
activities and responses.
Candidates will probably not focus so much on these fundamental principles as explain the
impact of the Internet and mobile technology on marketing activities (web-marketing/online
marketing, e-marketing), giving examples of Internet marketing such as direct sales to
customers, targeted Internet marketing campaigns, showing design features of products and
services as customers research products at their own convenience. Reference might be
made to the opportunity to reach a wide audience for a small fraction of a traditional
advertising budget and to measure at a click the impact of different messages – social media
in general, e.g. Facebook and Twitter.

(b) Discuss the impact on a car manufacturer of using new technology in its design and
manufacturing operations. [12]
The benefits could include:
• improvements in quality of design and manufacture
• more standardised product quality, less room for human error
• improved productivity, allowing for 24/7 production – no need for rest days or holidays
• lower average costs (extra fixed cost more than compensated by reduction in operating
costs)
• speedier development of new cars
• quicker process of product design and development – animation and virtual reality can
conserve resources (time, materials, energy)
• lead to more customer choice, more flexible manufacturing, less lead time, less waste,
higher finished quality.
The drawbacks might be:
• higher fixed costs
• the high initial cost of installing and updating the new technology – major capital
investment required
• retraining costs as equipment is constantly updated to ensure that new technology is
used effectively
• demotivation as automation can lead to skilled workers being reduced to machinery
operators, leading to reduced levels of worker motivation
• loss of jobs and the need to reorganise the work-place and the working environment.
Evaluative comment on the benefits and drawbacks of using new technology in context
(e.g. on balance is it good or bad?).

6 Discuss how the closure of a business owning many large retail stores might affect
different stakeholders. [20]
Answers might initially define stakeholders and then identify different ones in this business
context – company closure:
• Employee – job losses, possibility of getting new jobs, depends on local and national
economic situation, probably low skill base, impact on personal family situation.
• Customers – loss of traditional store, reduced choice (though may already have switched
shopping loyalties thus causing the closure).
• Shareholders – if a plc, share price probably hit the floor, giving significant losses.
• Local community – job losses have a multiplier effect leading to local economic depression,
impact of large empty shops in shopping areas.
• Suppliers – possible short-term losses, in search of new buyers.
• Competitors – opportunity to move into the gap created by the closure etc.
Impact depends on the severity of the economic situation and some stakeholders damaged
more
than others.
Evaluative comment on the impact of this closure on specific stakeholders (possible comment on
the relative damage done, worst/least affected).

7 (a) Explain the usefulness for a business leader of McGregor’s classification of

leadership styles (theory X and theory Y). [8]
Answers may initially describe McGregor’s classification of theory X and Y as perhaps a
stark choice in making assumptions about those who a leader intends to lead and manage.
(Theory X: employees don’t like working, do as little as they can, need to be told what to do,
only interested in money, must be closely watched. Theory Y: employees enjoy their work,
will work hard to gain rewards, will work unsupervised, are motivated by things other than
money.) The classification identifies different assumptions that leaders may make in respect
of employee attitudes to work. It suggests that as a result of these different assumptions,
leaders may respond differently to the leadership role or may recognise that different
responses are legitimate and appropriate. It informs leaders that there is not a one-track
approach to leadership and management. It reminds leaders that leadership and
management are complex activities and the issues raised in theory X and Y provide direction
and understanding for thoughtful leaders.

(b) Discuss the factors that a business leader might take into account when choosing
between an autocratic and laissez-faire leadership style. [12]
Initially perhaps a description of autocratic and laissez-faire leadership style options. Strong
candidates (as in part (a)) may well recognise that any particular leadership style chosen and
its appropriateness depend on factors such as:
• the business context – production/manufacturing culture, service business, public sector
business, small/large business
• the expectations, experience and aspirations of employees
• the objectives and culture of particular businesses
• the skills, competencies, and predilections of leaders themselves.
Autocratic style may be appropriate for crisis or emergency situations where explicit orders
are required and expected (military, rescue services, public order). Laissez-faire style may be
more appropriate for a group of professional workers such as architects where creativity and
innovation are expected and encouraged.
Some evaluative comment on identified factors that leaders may take into account when
choosing one or both of the two leadership styles.

Nov 2012/11

5 (a) Explain how a business could use financial rewards to motivate its workers. [8]

Candidates may well put the answer into a theoretical context using Taylor and his theory of
‘economic man’ and then specifically explain the various financial rewards that might be used
to motivate workers, such as: wages, salaries, piece rate payments, payment by results,
commission, bonus payments, share ownership, fringe benefits, profit sharing etc.

(b) Discuss the importance of training and development in motivating the workforce in a
school. [12]

Staff training and development has the essential aim of ensuring that workers are well
equipped to perform duties and responsibilities now and in the future. It is considered to be
important to ensure a business has a workforce with the appropriate skills, competencies and
experience to contribute to an efficient and effective business. The discussion may give
examples of staff training: on-the-job, in-house, external, to increase productivity and
capability of workers, supporting job enrichment/enlargement policies, motivate staff, giving
more confidence/sense of achievement and staff development: prepare staff for new
challenges, promotion, secondment, delegation etc. Motivation theory references if accurate
and relevant should of course be rewarded.
The context of a school will of course have a number of different categories of workers –
academics, administrators, and support staff each having different training/development
needs.
• evaluative comment on the importance of training and development in motivating
workers in context of a school

6 Discuss the view that ‘Just-in-Time’ is the most effective way of managing the inventory
of businesses. [20]

Answers might well initially define JIT – the stock control method that aims to avoid holding
stocks by requiring supplies to arrive just as they are needed in production. This method has
influenced businesses across the world and its potential benefits and advantages might suggest
that there is no more effective way to manage inventories – it is easy to understand, it offers
significant savings in employee and capital costs, reduces wastage and supports quicker
response times for customers, reduces storage costs, etc. The benefits are potentially
considerable. However while JIT may be easy to understand it is often less easy to put in
practice
and has drawbacks that may make the method unsuitable for many businesses. It requires
excellent relations with suppliers, production staff need to be multi-skilled and flexible, a different
organisational culture may be required, very accurate demand forecasts are required for
production schedules, the delivery costs of a larger number of smaller supply orders may be
higher, administrative costs may increase, costs of halting production to wait for supplies may be
costly, small companies may find IT systems required may be prohibitive, and with rising global
inflation it may make good sense to hold and store stock.
So lots of potential advantages of moving to JIT approach but there are requirements and
drawbacks that might make the system ineffective for all sizes and types of businesses.
Individual
and particular company circumstances will determine the viability of adopting JIT.

evaluative comment on the viability for businesses to adopt a JIT method of inventory control

7 (a) Explain the importance of a USP (unique selling point/proposition) to a mobile (cell)
phone manufacturer. [8]

Answers could define the marketing concept of a USP, a specific means or method of
product differentiation to gain a competitive advantage, the aspects of a product or service
that makes it different from others. The context of a mobile phone business is the intense
market competition and where products may be subject to rapid and significant changes in
fashion and technology, the requirement to continually establish and review the USP of the
product and to communicate it through promotion and advertising.

(b) Discuss how a retail store could improve customer relations. [12]

Concern for the customer is considered to be of vital importance as retail stores compete for
business (some people are in fact willing to pay a premium price for distinctive customer
care). A customer focus (or indeed obsession) is considered to be a cultural characteristic of
successful retail stores and an essential component of reputation and loyalty. Good customer
care becomes so significant and obvious that it assumes the role of a USP. A business may
make improved customer relations a key organisation objective or a key feature of the
mission statement. Hence it may use this to motivate/incentivise staff – customer relations
may become a key feature of appraisal/staff development systems. It may also prompt the
business to examine the style of management and leadership, to establish and support a
culture of customer care. Specific methods could include: opportunities for customer
feedback and suggestions, improve the service to customers, improve the range of
products/information about goods, take on more staff/more training for existing staff, etc.
• some evaluative comment on a range of practical proposals (perhaps a strategy) to
improve customer relations in a retail business

Nov 2012/12

5 (a) Explain the usefulness to a business of Mintzberg’s classification of the roles of

managers. [8]

Reference should be made to the Mintzberg model of 10 managerial roles for top managers
divided into three groups 1. Interpersonal Roles (figurehead, leader, and liaison roles) 2.
Informational Roles (monitor, disseminator, and spokesperson roles) 3. Decisional Roles
(entrepreneur, disturbance handler, resource allocator, negotiator roles). We do not require
the classification in full, rather reference to specific aspects when explaining the value of the
classification: in describing what managers are expected to do, better understanding of the
managerial function, acts as a benchmark for deciding on a job specification, for manager
training/development, The classification suggests that the manager role is quite varied and
often contradictory in its demands. The classification can be used as a set of evaluation
criteria for assessing the performance of a manager.

(b) Discuss the view that effective managers need a high level of emotional intelligence.
[12]

The view is that as well as an appropriate level of intellectual intelligence (IQ) effective
managers should have and develop an appropriate level of emotional intelligence (EI) or
emotional quotient (EQ). This is the theory of multiple intelligences and emotional intelligence
is said to be the ability to understand and manage your own emotions and those of the
people you work with and manage and so achieve better business performance. It is
suggested that IQ is insufficient for effective management, indeed too much IQ and too little
EQ can lead to poor management behaviour and low business performance. Goleman
developed the notion of emotional intelligence competencies: self awareness, self
management, social awareness, and social skills. With these managers are more likely to
have self confidence, a more realistic awareness of employee characteristics and needs,
recover more quickly from stress, manage stress better, develop self control, become more
sensitive and empathetic, negotiate and lead with a more emotionally stable behaviour. The
idea that ‘soft is hard’ for the practice of effective management. Consider the tasks and
situations a business manager needs to manage and the value of a measure of emotional
intelligence may seem obvious.
• evaluative comment on the significance of EQ to effective managers

6 Discuss the factors the senior managers of a business should consider when deciding
between a capital intensive or labour intensive production process. [20]

Answers might initially define capital and labour intensive production processes: capital intensive
involves a high quantity of capital equipment and mechanisation while labour intensive involves
a
high level of labour input to the production process. These are alternative approaches and senior
managers must decide what combination of factors of production they will use.
Among the factors to be considered are the following: the nature of the product, the product
image that the business wants to establish, the relative prices/cost of the two inputs (if labour
costs are high and rising the use of capital might become economically justifiable), the size of
the
business and its ability to afford expensive capital equipment, the state of technological
innovation and the decisions of competitors to modernise or change their production processes.
Labour intensive methods of production might be most appropriate for a hand built reproduction
furniture business where consumers are prepared to pay a premium for a distinctive product,
whereas mass produced items are supplied from a capital intensive process. In general terms
job
production items tend to be labour intensive and flow production items tend to be capital
intensive.
• evaluative discussion of the factors determining alternative production processes

7 (a) Explain why many businesses spend large amounts of money on market research.
[8]
Answers may well initially define market research: the collection, recording and analysis of
data about customers, competitors and markets. The question is about WHY spend money
on market research NOT how.
The reasons why businesses spend lots of money on MR could include the following: to
provide important information for business decisions relating to issues and questions such
as: will customers buy this new product or service, what will the reaction be to proposed price
changes of our products, what will be the reaction to different forms of product promotion,
packaging, distribution channels? MR might reduce risks associated with product launches,
might predict future demand changes, explain existing patterns of sales and market trends,
reveal perceived strengths and weaknesses of products and services. The provision of
information that might assist in an evaluation of current and future marketing strategies.
• analysis of reasons for market research expenditure

(b) Discuss the advantages and disadvantages of using the Internet to collect market
research data. [12]
The Internet is increasingly seen as an effective method of collecting market research
information. Visitors to sites can be asked to complete electronic questionnaires often with
incentives offered and data can be collected when visitors sign up for membership. Online
marketing research has grown considerably in recent times with surveys, and online focus
groups providing primary data. Web research has proven to have several advantages over
offline surveys and focus groups, the most obvious being speed and low cost of execution. It
is relatively low in cost in the sense that participants from all over the world can engage with
a discussion with no travel or living expenses costs. Online surveys substantially reduce
paper work, postage, phone charges, labour costs and printing expenses. Also speed of
execution and response rate can be better as responses can be made in a person’s own
space and at their convenience. Once completed, results are available to researchers
immediately, can use graphics and visual aids. There are however some disadvantages:
restricted Internet access may make it difficult to get responses from a broad cross section of
a society, rural marketing campaigns may be difficult, access to products orientated for
example to young children e.g. 4 to 10 years, there may also be a problem controlling who is
in the sample, the researcher is not able to see the participant, how can you measure
respondents expressiveness? (Technology may soon remove these limitations of course.)
There is the privacy/ethics question, will researchers sell emails and responses to other
parties, or open up respondents to unsolicited messages etc., it also needs knowledge of
software to set up questionnaires and methods of processing data and requests may deter
visitors from your website.
• some evaluative comment on the advantages and disadvantages of collecting market
research data from the internet

Nov 2012/13
5 (a) Explain the difference between CAD (computer-aided design) and CAM (computer-
aided manufacturing) in a business context. [8]

Businesses now make greater use of technology in both the design and manufacture of
products and, in the service sector, technology has improved the ability to handle and store
data and has transformed business communication.
CAD is the use of computer technology to assist in the design of a product – CAD packages
allow designers to produce two/three dimensional models of products using touch screens,
light pens, etc. – virtual reality is constructed, use of scanners, digital cameras, enhanced the
ability and possibilities of the design function. CAM uses computer software to assist in the
manufacture of products, the process of using specialised computer systems to control,
monitor, and adjust the tools and machinery used to manufacture, robotics and other forms
of automation. (CAD and CAM can be interfaced with a potential to transform the
manufacturing process, facilitating decisions about how to design and manufacture, how to
make changes, and how to invest.)
• good explanation of the difference between CAM and CAD with some analysis of
the business application of one or both

(b) Discuss the benefits and limitations of using new technology such as CAD and CAM.
[12]

The benefits could include: improvements in quality of design and manufacture, more
standardised product quality, less room for human error, improved productivity, allowing for
24/7 production, no need for rest days or holidays, lower average costs (extra fixed cost
more than compensated by reduction in operating costs), speedier development of new
products, quicker process of product design and development, animation and virtual reality
can conserve resources (time, materials, energy), lead to more customer choice, more
flexible manufacturing, less lead time, less waste, higher finished quality.
The limitations might be: higher fixed costs, the high initial cost of installing and updating the
new technology, major capital investment required, retraining costs as equipment is
constantly updated to ensure that new technology is used effectively. Demotivation as
automation can lead to skilled workers reduced to machinery operators leading to reduced
levels of worker motivation – loss of jobs and the need to reorganise the work place and the
working environment.
• evaluative comment on the benefits and drawbacks of using new technology (on
balance good or bad?)

6 Discuss the view that money is the only factor that motivates people to work hard. [20]

Answers might initially recognise that financial rewards are considered to be very important as a
means of motivating and satisfying workers. Theorists such as Taylor and the ‘economic man’
theory may well be described to support the significance of monetary reward as may be
examples of specific financial rewards.
Candidates will likely suggest revisions to the ‘economic man’ theory and challenge the view that
money is the “only” motivator to hard work by citing other theorists such as Maslow, Mayo,
Herzberg, McClelland, and Vroom and their alternative theories that suggest that such factors as
enjoyment, challenge, and recognition are very important.
Suggestions may well be made that workers have a variety of needs that can be met at work and
that money is not likely to be the sole motivating force. It may also be work/organisation/person
specific.
• evaluative discussion of factors that may motivate people to work hard

7 (a) Explain the link between marketing objectives and corporate objectives. [8]

Corporate objectives provide the context and provide the strategic vision and purpose for
marketing planning and the setting of marketing objectives. Corporate objectives are
determined by senior managers and reflect the mission statement of the organisation and are
communicated to all departments. The marketing department set objectives that help the
business achieve its overall corporate objectives. If the corporate objective is to maximise
profit then marketing objectives may well focus on maximum sales at highest price possible.
If corporate is focused on social responsibility as well as profit there may well be a social
marketing approach. If a business wishes to expand internationally then marketing objectives
will be different to those supporting a consolidation in the domestic market. If the corporate
objective is to grow the business then supportive marketing objectives could include:
increase market share, gain market leadership, rebrand a product, develop new markets.
Marketing objectives must above all be based on company financial objectives.
• analysis of the link between corporate and marketing objectives

(b) Discuss how an understanding of market segmentation could help a luxury hotel
achieve its marketing objectives.[12]
Initially perhaps a definition of market segmentation – identifying different segments within a
market and targeting different products or services to them, a customer focussed marketing
strategy, the objectives of the hotel or company owning the hotel might seek to grow the
business, increase its profitability, enhance the brand, increase the volume occupancy.
Market segmentation could help by: identifying and targeting potential market segments such
as business traffic during the week, leisure traffic at weekends, special event traffic,
celebrations/weddings, conference traffic and so producing services that are specifically
aimed at particular groups leading to increased sales or identifying gaps in the market not
currently being exploited, can use price discrimination for example.
• some evaluative comment on how market segmentation might help the hotel to
achieve its marketing objectives

Nov 2013/11
5 (a) Explain the difference between revenue expenditure and capital expenditure. [8]

The distinction between capital and revenue expenditure may be explained in the
following terms:
– Definitions of both: – capital expenditure – purchase of long-lasting assets; revenue
expenditure – spending on costs and assets other than fixed assets.
– They will almost certainly be financed in different ways.
– In accountancy terms, they will be recorded differently
– All revenue expenditure will be recorded on each year’s Income Statement and will,
therefore, reduce that year’s profits; – capital expenditure is recorded on the Balance
Sheet as a depreciation item on each year’s Balance Sheet.
– Capital expenditure more likely to increase the earning capacity of a business (its noncurrent
assets) while revenue expenditure merely maintains the assets earning capacity.
– Capital expenditure increases a business’s asset position.
– Improper asset classification can skew the financial position of a business.

(b) Discuss the appropriateness of using internal sources of finance to pay for capital
expenditure.[12]

Internal sources of finance to fund capital expenditure include:

– Retained profits in a business can finance capital expenditure – assuming it is
trading profitably.
– Newly-formed companies or loss trading companies limited opportunity to use/access
internal sources.
– Sale of assets can raise cash for established companies – leasing will also raise capital
(e.g. a company can sell its valuable HQ and lease it back).
– Reductions in working capital – can lead to liquidity concerns.
– Many advantages for using internal sources – no direct cost to the business – no
increase in liabilities or debts, or loss of control by owners.
– But not available to all companies.
– May slow down growth as there will be a limit to amount of capital available usually.
– So external sources may well be required.
• Evaluative comment on appropriateness of using internal sources.

6 Discuss the differences and similarities between ‘business enterprise’ and ‘social
enterprise’. [20]

Business enterprise defined as activity where the primary motive is profit – production of goods/
services to consumers at a profit – create wealth.
Social enterprise more narrowly defined – social mission-driven organisations applying
marketbased
strategies to achieve a social purpose/environmental purpose – re-investment of profits
into community or back into business.
– In many ways they are very different – but in some ways very similar.
– Business enterprise may be identified as: (entrepreneurs)
– create employment – generate business activity.
– increase economic growth – GDP of a country increased.
– business grows and develops – multi-nationals.
– innovation and technological development takes place.
– international competitiveness improved – export markets.
– economic development improves social cohesion.
– all the benefits of a successful market enterprise system.
– but can be socially responsible (and socially irresponsible) and advance social issues
and cohesion.

– Social enterprise may include: (triple bottom line)

– specific social benefit to economies (national and local).
– create employment for often disadvantaged employees and communities.
– protect and advance environmental issues alongside production processes.
– re-distribute production benefits, not just to shareholders or a limited number of
shareholders.
– complement wholly public sector owned organisations.
– highlight ways in which business enterprise can be improved.
– in so doing create employment – generate taxation and economic benefit.
Social enterprise units can be entrepreneurial and very efficient, and business enterprise units
can be very socially responsible.

Evaluative comment on the differences and similarities between ‘business enterprise’ and
‘social enterprise’ for economies.

7 (a) Explain why some businesses might use both above the line and below the line
methods ofpromotion. [8]

‘Above the line promotion is:

– A form of paid-for communication by business in the mass media to inform and persuade
– e.g. advertising on TV, cinema, newspapers.
– Main aim is to inform, raise awareness and build brand positioning – relatively high cost
promotion.
– It can be targeted but often is seen by anyone outside of the target audience.
– Communication targeted to a wider spread of audience and not specific to individual
consumers.
Below the line promotion is:
– Promotional activities where business has direct control over the target or intended
audience – sales promotions – personal selling, sponsorship, PR, point of purchase
promotions.
– Designed to achieve short-term sales increases and repeat purchases by consumers.
– More one-to-one approach, e.g. sampling, demonstrations – more touch and feel.
Why use both:
– These two types of promotion are used in pursuit of essential marketing objectives –
To maximise the present information to customers and others.
To increase demand and build brand awareness.
To differentiate a product and drive sales through specific promotional offers.
– The distinction between the two kinds of promotion is not absolute and some see the
terminology as antiquated – digital communication has broken down the boundaries –
now the phrase ‘Through the line’ is increasingly being used where for example a TV
advert is combined with a flyer through the door – multiple consumer engagement
points.

(b) Discuss the advantages to a designer of children’s clothing of establishing a powerful

brand identity. [12]
The discussion of advantages from effective branding could include:
– A strategy that differentiates a product from competitors by creasing an identifiable
image and clear expectations of the product.
– It can create a powerful image in the minds of customers, e.g. for quality/style.
– Provides a product with a unique identity.
– Increase the chances of brand recall by consumers.
– Allow for a ‘family’ of closely associated products to be established.
– Reduce price elasticity of demand as consumers prefer well known brands.
– Increases consumer loyalty to brands.
– Brand can give reputation and goodwill.
– Creating durable and distinctive perceptions in the minds of consumers is then
potentially very valuable – but it can be expensive to establish and it needs careful
protection and safeguarding.
• Evaluative comment on advantages of effective branding in context.

Nov 2013/12
5 (a) Explain the importance of cash flow forecasts to a newly established business. [8]

Cash flow forecasts.

Identifies sources and amounts of cash coming into a business.
Identifies destinations and amounts of cash going out of a business.
Usually done for a year or quarter in advance.
Allows the prediction of peaks and troughs in cash balances.
Helps to plan how much and when to borrow.
Banks require cash flow forecasts before considering a loan.
All these factors are important for new businesses who may well encounter cash flow
problems.
New business planning requires cash flow forecasts to help identify future problems, inspire
confidence in lenders, help obtain funding and help new businesses to survive in the short
term.

(b) Discuss how a business could solve cash flow problems. [12]
The reasons for cash flow problems may include:
Lack of financial planning (e.g. no cash flow forecasts).
Poor credit control – bad debts will increase.
Too generous trade credit.
Unexpected cost increases.
Unexpected dip in customer demand.
Incorrect forecasts.
Expansion too fast.
Possible solutions to cash flow problems:
Essentially, more cash inflows –
overdraft/short-term loans.
sale of assets.
sale and leaseback of assets.
reduce credit terms.
debt factoring.
Essentially, less cash outflows –
delay payments to suppliers.
delay spending on capital equipment.
use leasing of capital equipment.
cut overhead expenses (e.g. promotion costs).
• Evaluative comment on causes and solutions for cash flow problems.

6 Discuss the important factors that will need to be considered by a business in deciding
where to locate a new adventure and amusement park. [20]

The most important factors affecting the location decision are likely to include:
A recognition that this is a long-term, strategic, optimal decision.
Location should sustain long-term profitability.
Location should have flexibility to expand and grow.
Specific factors might include:
site, building, fitting costs
labour costs
transport costs/facilities
sales revenue possibilities
availability of government grants
cultural features of alternative locations
environmental issues
quality of infrastructure
site of competition
Decisions likely to be a set of compromises – an optional solution is not always clear cut – level
of risk.
Optimal location decisions can be affected by cost and other factors changing over time.
• Evaluative comment on the complexity of location decision, in context.

7 (a) Explain the differences between Herzberg’s hygiene factors and motivating factors.
[8]
Herzberg ‘two factor theory’
‘Hygiene factor’ is related to aspect of a worker’s job that may have the potential to give
dissatisfaction.
Pay, working conditions, status, type of supervision – these are seen as lower order needs.
The extrinsic factors that surround a job – these need to be addressed by management in
order to remove dissatisfaction.
But if hygiene factors are OK, they would not, by themselves, lead to motivated workers.
A second set of factors – motivators need to be addressed.
These are the intrinsic factors – achievement, recognition, work itself, responsibility and
advancement.
To motivate, you focus on these higher order needs, e.g. job enrichment.
So, to remove dissatisfaction, focus on the job environment – to increase motivation, focus
on the job itself.
NB. An acceptable alternative approach would to discuss Herzberg’s hygiene factors and
then general ‘motivating factors’

(b) Discuss the relevance to employees of a fast food restaurant of the motivational
theories of Maslow and Herzberg. [12]

The discussion will likely include the following:

Reference to Maslow’s hierarchy of human needs.
these needs can be satisfied at work.
lower and higher order needs.
some general concerns about this theory, e.g. money is important for lower order needs but
can play a role in satisfying higher order needs, e.g. status and esteem.
specific concerns – do workers work in fast food restaurants to satisfy higher order needs?
Application of the hierarchy to the context is expected.
Reference to Herzberg and his ‘two-factor theory’.
‘extrinsic factors’ more likely to be significant in the context of a fast food restaurant?
how significant are ‘motivators’?
opportunity for team work and job enrichment may exist in a fast food restaurant so
‘motivators’ may be important.
• Evaluative comment on the relevance of one or both of these theorists to the context of a
fast food restaurant.

Nov 2013/13
5 (a) Explain the importance of inventory management to a retail business. [8]
Inventory management is considered a critical business activity because without efficient
inventory management there may be:
– insufficient stocks to meet demand and changes in demand.
– out of date stock.
– stock wastage.
– excessive storage costs.
– late deliveries.
– low discounts from suppliers.
– opportunity cost implications.
The factors above (especially the first 3) are vital for retail businesses with their potential
impact on customers.

(b) Discuss the factors which could influence the successful operation of Just-in-Time
(JIT)
inventory management. [12]

The factors that might need to exist for JIT to work effectively are generally considered to be
(after defining JIT):
– Relationships with suppliers need to be good – flexible.
– Production staff need to be multi-skilled and flexible.
– Similar flexibility required in equipment and machinery.
– Demand forecasts and production schedules need to be accurate.
– Up-to-date IT equipment will help.
– Sound employer-employee relations required.
– A distinctive organisation culture required.
– JIT might not always be the answer.
• Evaluative comment on the relative importance of the factors and/or recognition of the
problematic application of the system.
6 ‘Effective business leaders need to be more emotionally intelligent than intellectually
brilliant.’Discuss this statement. [20]

Business leadership is said to be about giving clear direction and vision for an organisation –
often
requiring charismatic attributes and strategic vision.
– Intellectual ability can be said to be important –
ability to see the big picture
ability to differentiate between tactical and strategic issues
ability to analyse, evaluate, make decisions
ability to understand and apply theory and concept
ability to convince others – negotiate – compromise etc.
– Emotional intelligence – a recent concept is seen by many as important, if not more
important than intellectual intelligence for effective leadership – the concept of multiple
intelligences.
definition of emotional intelligence – the ability to understand own emotions and that of
their colleagues, manage them to support improved performance.
the concept of Emotional Intelligence Quotient and Golemans EI competences.
the potential liability of a leader without a competent EIQ.
– The relative importance of IQ and EIQ – reviewed – different assertions and conclusions in
the literature.
• Evaluative comment on the statement vis-à-vis intellectual ability and emotional intelligence.

7 (a) Explain why it is important for a business to be able to identify and calculate its
costs. [8]

The identification and calculation of business costs is considered important as:

– Cost information is vital in a wide range of business decision-making.
– Business costs are a key factor in calculating profit or loss.
– In making location decisions, pricing decisions, product profitability over time.
– Acting as a start point for future budgets.
– Decisions about resource use – if cost of labour is low, then focus on labour intensive
methods.
– Cost information facilitates different options being analysed for decision-making – e.g.
different location decision options. So cost calculation and data vital for so many
business decisions.
– NB: Credit discussion of social costs
• Analysis of the importance of cost identification and calculation.

(b) Discuss how break-even analysis could be useful for a business decision on
introducing a new product. [12]
The use of break-even analysis for introducing a new product could make the following
points:
– Discuss how break-even analysis will categorise production costs and compare them
with potential sales revenue to determine a break-even point where the costs of
resources to create a new product are covered.
– Managers may also want to know the point at which the sales volume reaches a pre-set
profit level.
– To help increase the odds of success for a new product a business needs to ask a
number of questions such as what is the potential size of the market, how shall the
product be priced?, where is the break-even point? Is one of these questions it can
provide vital management information.
– E.g.: if the B/E point is over say 12 months, how does the business capitalise that
product, and is it worth going ahead with this new product.
– B/E charts relatively easy to construct and interpret.
– However, there are limitations as to the use of B/E analysis – simplistic, a static model,
the effectiveness depends on the quality and accuracy of the data used – assumes
linearity, no account of possible changes in costs over time – does not allow for changes
in market conditions in the time period etc.
– So some general limitations plus some specific to new product decisions – noneconomic
factors may influence such a decision – e.g. subjective personal owner
preference decisions – political interference, social/cultural influences, etc.
• Evaluative comment on the usefulness of B/E analysis and its possible limitations, in
context.
Nov 2014/11
5 (a) Explain why a business needs to hold a suitable level of cash. [8]
This is a question about the importance of liquidity and cash flow.
• Businesses must ensure that they have enough cash to meet all demands in the short
term.
• While it is important in the long term for a business to make profits, in the short term
cash flow and liquidity issues are of vital importance.
• Many profitable businesses fail because of insufficient liquidity.
• Businesses need to keep a constant watch for signs of liquidity problems.
• Holding a sufficient level of cash to ensure that short term liabilities are met and that the
day to day needs of the business can be covered.
• Businesses may over trade: a business may be expanded too rapidly without the
necessary finance so that a cash-flow shortage develops.
• Cash flow and liquidity issues are particularly significant for small and new businesses.

(b) Discuss how a small business could improve its cash flow. [12]
Cash is the lifeblood of a small business. So cash flow analysis is vital for small businesses.
They must first identify reasons for cash flow problems in order to take steps to improve the
situation.
Some specific ways for improvement may include:
• reduce fixed costs such as rent, building costs, staff expenses...this is probably a difficult
option
• seek to lower your variable costs - lower your costs of goods sold
• trim inventory-possibly giving fewer choices to customer
• bill promptly and review credit policy
• recover debts and better manage late payments
• make a more attractive offer to customers
• seek better deal with suppliers
• consolidate loans for better interest rate
• check prices in respect of competition (often customers expect small and regular price
increases)
• sell underutilised assets
• approach bank for extended overdraft.
Strong candidates may well recognise that the measures set out above are not` specific` to
small businesses – small businesses may not be able to adopt some/all of these measures.
• Evaluative comment on the likely impact/success of particular measures for small
businesses.

6 Discuss the main factors an electronic goods manufacturer should consider before
deciding whether to sell its products through the Internet. [20]

A business should be clear why it is considering selling on the internet – to open up the business
to a much bigger market and increase sales? – should this happen, has it got the productive
capacity and the financial resources to expand?
Factors to consider might include:
• Review the logistics of selling online – can you deliver the product easily and cost-effectively
to customers?
• A website needs to be designed – need to employ a specialist designer to produce a
functional website?
• Determine how the business will market products – decide how to create a large amount of
traffic on website.
• Need to review costs (extra costs) associated with online selling, e.g. cost of designing,
maintaining, hosting website – marketing expenses, payment processing costs.
• Need to do a cost/benefit exercise – is profitability maintained or enhanced or depressed?
• Continue with traditional selling to spread the risk?
• How well will the internet serve your business needs?
• How well will your particular business model fit into the way the World Wide Web works?
(context to be referenced).
N.B. The context in this question is ‘electronic goods manufacturer’.
Evaluative discussion of main factors that could be considered (in context).

7 (a) Explain the weaknesses of ‘family owned’ businesses. [8]

The inherent strengths of family owned businesses – businesses where the voting majority is
in the hands of the controlling family – are many for example:
• family dedicated to business – work hard to build and grow the company and re-invest
profits and
• there is pride and focus in reputation and quality of product and maintain good relations
with external stakeholders.
But, the weaknesses often outweigh the strengths, weaknesses such as:
• complexity of different roles played by family members and governance problems –
different motives and strategies from different family members
• too much informality, not enough clear business practices and procedures – with growth
may come significant conflict
• neglect of strategic management, succession planning, lack of external management
expertise
• plus, family owned businesses may have poor cost control, poor cash flow, poor
management
• means that the majority of family owned businesses are not sustainable
• discipline difficulties i.e. reluctance to discipline or sack family members
• family arguments might be brought into the work situation.

(b) Discuss why some businesses do not set a growth objective. [12]

It is often assumed that one of the main objectives of a business is to grow – this may not be
the case. There may be reasons why a business cannot grow and reasons why a business
does not want to grow:
• Businesses may not have the option to set growth as an objective – they may operate in
a niche market.
• Limited capital may prevent growth.
• Businesses may be family businesses with neither the ambition nor the capacity to grow.
• Businesses do not have to grow to become (more) successful.
• They can exploit their advantages – a small business has manoeuvrability – it can act
and react fast.
• They can grow through outsourcing or joint ventures.
• Businesses can give customers the satisfaction of personal interacting and thus retain
their competitive advantage.
• Non-pecuniary benefits – being one’s own boss, flexibility are first order issues for small
business owners.
• Businesses often content to exploit entrepreneurial skills and competences in a selected
restricted area of business.
• The nature and composition of many businesses (e.g., small shops, solicitors,
accountants, restaurants, small-scale manufacturing, means that they do not seek
growth.
• Businesses survive and succeed by remaining small and supply to large businesses.
• Might be new/small business; growth is not yet an appropriate aim.
• Shareholders might not want a company to grow.
Evaluative comment(s) on the reasons for businesses not setting growth
as an objective.

Nov 2014/12

5 (a) Explain the interrelationships that exist between marketing and other departments
within a business. [8]

As a business activity, marketing has important links with other functional departments, e.g.
finance and H.R.M.
In order to achieve marketing objectives such as increased sales and profits, a marketing
department will have a significant influence on the work of other departments.
Market research data may have a key role in new product development and sales forecasts
will impact on operations department as it plans for capacity and inventory levels.
H.R. departments will have to ensure appropriate levels of staff are in post in production and
sales to meet the marketing forecasts.
Finance departments will need to support a planned marketing budget and use marketing
data to devise operational budgets and cash flow forecasts.
(b) Discuss the advantages and disadvantages of niche marketing for a small
manufacturer of fashion clothing. [12]

• For smaller businesses mass marketing is not an option – too expensive.

• The best niche marketing is based on designing goods or services specifically tailored to
the needs of particular customers.
• Lower initial costs, especially for advertising.
• Focus on company strengths and their niche targeted activity.
• Competition may ignore the niche – too small – or unaware.
• Businesses can develop expert knowledge in the niche giving a real advantage over
potential customers.
• However, market niches can disappear as a result of changes in economic conditions,
fashion, or taste.
• Mass market businesses may target the niche if it grows in value or size – small firms
may find the competition too strong.
• Niche marketing vulnerable to big and/or frequent swings in consumer spending.
• Economies of scale are limited.
6 Discuss the usefulness of profitability ratios and liquidity ratios for senior managers
when analyzing the performance of their business and their competitors. [20]

• Accounting ratios (such as profitability and liquidity ratios) assist managers to analyse the
current financial position of a business.
• Ratios simplify understanding of financial statements and identify changes in the financial
condition of a business.
• Ratios facilitate inter-business comparisons. Ratios highlight the factors associated with
successful and unsuccessful businesses.
• Ratios assist in financial planning, forecasting, and control – basic management functions.
• Ratios indicate level of suggested management efficiency – if resources are being employed
efficiently, if sales revenue is being converted into net profit, if the company is managing
working capital effectively.
• However, accounting ratios have limitations – even though they are simple to calculate and
easy to understand.
• Financial statements (from which ratios are calculated) may be affected by accounting
conventions and concepts.
• Forecasts based on ratio analysis may be substantially affected by factors such as market
conditions and management policies.
• Non-financial issues/charges not reflected in the ratios may be more important than financial
indicators.
• Competitor companies may use different accounting principles and procedures so making
comparison difficult.
Evaluative discussion of the value of both accounting ratios for senior managers.

7 (a) Explain the aims of a ‘social enterprise’ organisation. [8]

• A business with mainly social objectives that reinvests profits into benefiting society,
rather than maximising returns to owners.
• Have distinctive aims and objectives – while sharing some characteristics of other types
of organisation – they rely on the market and sales for income – but they have a sense
of social mission and have social ownership structures.
• They seek to use business solutions to achieve public good – and operate in a wide
range of areas, e.g. health and social care, transport, childcare in U.K.
• So they have social and business aims (often referred to as “double bottom line”, or
some add environmental aims and are referred to as “triple bottom line”.
• They have economic objectives – profit to reinvest.
• They have social objectives – provide jobs and support communities, often
disadvantaged sections of communities.
They often have environmental objectives – to manage the business in an environmentally
sustainable way.

(b) Discuss the importance of ‘business enterprise’ in your country. [12]

• Business enterprise defined as initiatives concerned with taking risks and setting up
businesses making things happen – business opportunities are identified and calculated
risks are taken.
• Those who take risks and show enterprise called entrepreneurs – they make a major
contribution to the development of business enterprise in a country – seize initiatives –
add value, create jobs – make profits – contribute to social investment via taxation.
• Business enterprise(s) considered to be important in that:
• Jobs are created.
• Economic growth – increased living standards – tax revenues for governments to spend
on infrastructure.
• Businesses grow, expand, diversify and support a more developed economy.
• Adds dynamism to an economy – increased use of I.T. and new technology.
• Helps improve international competitiveness – exports.
• Helps achieve social cohesion in a country and supply important social goods.
• Economic development comes from economic growth which is significantly supported by
business enterprise – countries become industrialised and modernised through
sustained business enterprise activity.
Evaluative comment on the importance of business enterprise(s) to the development
of a country (in context).
Nov 2014/13

5 (a) Explain the benefits to a railway company of using price discrimination for ticket
sales. [8]
– Price discrimination is when a business charges a different price to different groups of
customers for IDENTICAL goods or services for reasons not associated with cost.
– A business must be able to segment the market and be able to keep the segments
separate. Train companies identify customers with different demand elasticities and
charge differential prices for tickets. Different groups of customers that can be kept apart
such as students, older people, families, can be charged different prices for the same
journey. Price discrimination provides opportunities for maximising revenue and boosting
sales

(b) Discuss why a business could use different pricing strategies during the life of a
product or service. [12]
In response to why different pricing strategies could be adopted, the following points could
be made.
– To reflect specific business/marketing objectives and strategies such as to maximise
profits or sales, to ward off competition.
– To respond to changes in market conditions.
– To manage the life cycle progress of the product/service.
Answers may well give examples of how these pricing strategies are implemented. This is
legitimate as long as the focus of the answer is on why different pricing strategies are used.
– A skimming pricing policy could be adopted in the early stages of a product life – but
perhaps only for a limited time – to exploit the uniqueness of the product/service.
– A penetration pricing strategy could be adopted to gain market share (again possibly for
a limited time).
– A competitive pricing strategy could be adopted to combat difficult trading conditions
and protect sales against competitors.
– Other pricing strategies could be adopted (cost plus, loss leader) depending on
business objectives, marketing strategies, and product life cycle stages management.
• Evaluative comment on why different pricing strategies could be adopted during
the life of a product/service.
6 Discuss the factors a large manufacturing business should consider before relocating
its operations to another country. [20]
– A major operational management decision – factors affecting any location decision will be
relevant, e.g. site/building costs, labour costs, transport costs, government
grants/government support, profit estimates.
– Re-location overseas involves other factors such as – can it achieve significant reductions in
cost – are they sustainable – how big is the market potential in this new country –
governmental financial support available? – Level of education / qualifications of staff –
cultural differences.
– Specification lists issues such as geography, demography, legal issues, political stability,
resource availability, infrastructure and markets as potential important factors influencing an
international re-location decision.
– Movement of exchange rates could be significant.
– A mix of economic and non-economic factors.
– Content specific to a manufacturing company could include availability of local manufacturing
skills/experience, ease of communication/use of local language, use of IT in process
engineering.
• Evaluative discussion of factors likely to influence a decision to relocate (in context).

7 (a) Explain the strengths and weaknesses of a ‘co-operative’ legal structure for
business. [8]

– These are joint ownership organisations – consumer, producer, agricultural worker

co-operatives – member owned – meet common economic, social and cultural needs of
members.
Strengths:
– Easy to set up.
– Open membership.
– Democratic management.
– Shared objectives.
– More responsible to communities and customers.
– Share surplus.
– Limited liability.
Weaknesses:
– Likely limited resources.
– Management can be inefficient.
– Disputes and differences can occur.
– Longer decision-making process.
– Lack of capital.
– Mass of members may lose interest.

(b) Discuss how ethics may influence the activities of a business. [12]

– Business ethics are concerned with how businesses treat the environment, work with
staff and suppliers to build a responsible company, relate to local communities and
produce a viable, sustainable company and adds value socially as well as
economically.
– Business ethics now part of the language of business, customers demand more and
management is trained to deliver more.
– May mean that a business makes explicit provision for ethical behaviour and ethical
performance.
– Might mean additional costs.
– More monitoring (e.g. of suppliers).
– May mean new and different practices, e.g. waste disposal – treatment of additional/
different shareholders.
– May be seen as part of brand building and reputational protection (USP).
– May be a source of additional investment for ethical investors.
– So positive and negative implications – becoming a necessity rather than a
discretionary approach to business decisions.
• Evaluative comment on the influence of ethics on business activity.

June 2013/13
5 (a) Explain why a Marketing Director needs to understand price elasticity of demand. [8]
PED is important for a Director of Marketing in that:
 Price is a key part of the marketing mix and pricing decisions need to be right for
business success.
  PED is a measure of the responsiveness of demand following a change in price and is a
potentially significant issue to consider when fixing/changing prices.
 PED facilitates making more accurate sales forecasts if, for example, production costs
necessitate a price increase.
 Assists in making pricing decisions – where and by how much to change.
 So a vital analytical tool/concept in pricing decisions.

(b) A new bus company has decided to enter a highly competitive city centre transport
market. Discuss the factors that the company needs to consider when deciding on its
pricing strategy. [12]

The factors that need to be considered could include:

 Reviewing the short-term and long-term objectives
 Costs of production – running the buses – do they need to be covered in the short-term if
market share is established? (Price penetration?)
 How strong is the competition? – Loss leader pricing.
 Is it possible to segment the market and focus on a few potentially profitable ranks? –
Price discrimination.
 Product differentiation – better quality busses – more flexible timetables etc. – may be as
important as the price.
 Pricing methods are relevant and should be rewarded but they need to be presented in
terms of pricing strategy options and marketing mix options rather than just a list of
pricing methods.
 Some evaluative comment on pricing strategy issues in context.

6 Discuss the factors a Human Resources Director could consider when seeking to
improve staff morale. [20]

After attempting some definition of staff morale – the spirit of a company’s workforce – the
degree of trust and confidence held, support for company objectives/management/leadership –
poor productivity, lack of loyalty, absenteeism.
 Needs to analyse and understand where staff morale is low and needs improving
(information and data may well exist within HR department if it is efficient!)
  Recognition that many factors impact on staff morale (external and internal) – internal
factors are the likely ones HR need to focus on, e.g. uncertainty, rumour, poor results,
poor quality products/services, poor management and leadership, poor marketing etc.
 Depending on the data and the quality of analysis, HR need to find some sustainable
initiatives to make an improvement in staff morale.
 How to change from negative to positive – from despair to confidence.
 E.g. – Build trust
 Root out poor management
 Plan for some ‘early wins’
 Engage the staff
 Improved service conditions
 Training and development
 Review intrinsic and extrinsic reward systems
 Review organisational structure and levels of responsibility etc.
 An evaluative response might address the feasibility of a substantial or a sustainable
increase in staff morale.
An evaluative discussion of some relevant factors and issues that could be used to improve staff
morale.

7 (a) Explain the likely conflict between the ‘triple bottom line’ objectives of a social
enterprise operating in your country. [8]

‘The triple bottom line’ is the definition of the objectives of a social enterprise organisation –
economic, social and environmental. It is said to be a challenge in that:
 The focus of a triple bottom line business is broader than a simple profit-making
organisation and a Social Enterprise is a business that seeks to make money in socially
responsible ways through the pursuit of three primary objectives: economic, social,
environmental. As well as making money in a socially responsible way Social Enterprises
often seek to invest any surplus (profit) into society. A Social Enterprise organisation, like
other organisations, often has to make decisions based on multiple and sometimes
conflicting/competing objectives but the focus will be on the ‘triple bottom line’. The 3
‘triple bottom line’ objectives are:
1. Economic – make a profit and survive.
 2. Social – ensure the well-being of people/employees, disadvantaged in the community,
customers etc.
3. Environmental – protecting the environment and managing the business in an
environmentally sustainable way.
There may well be tensions/conflicts between the 3 primary objectives of a Social
Enterprise. Perhaps the most notable tension is often caused by the need for a Social
Enterprise to remain economically viable and sustainable – being efficient, productive,
and profitable as it seeks to achieve its social and environmental objectives. There may
well be tensions and conflicts within each of the 3 objectives for example establishing
priorities for social and environmental objectives.

(b) Discuss the role business entrepreneurs could play in the future development of your
country. [12]

The discussion is likely to refer to the contribution business entrepreneurs might make to a
country in terms of the business enterprise culture and activities they bring or develop. An initial
explanation of entrepreneurial characteristics may follow with an emphasis on risk taking,
innovation, creating and strengthening business ventures, and generally improving the national
business enterprise culture and performance.
The contribution they make or may make to the future development of a country is likely
todepend on factors such as:
 The stage of development (economic) that a country is presently in
 The quality of the skills of the entrepreneurs.
 The support and encouragement given to the entrepreneurs by the government of a
country.
 The external issues that may affect a country in the future, given a dynamic and political
external environment.
The role of business entrepreneurs could include activities such as:
 Stimulating business enterprise in whatever form as the engine of economic progress and
development.
 Support infrastructure development and progress.
 Create jobs – multiplies effect on economy.
 Fostering entrepreneurial spirit – innovation – change.
  Creating opportunities for funding – taking advantage perhaps of international funding and
support.
 Entering into partnerships with government-funded structures and organisations.
 Educating people of the potential benefits of market activity and private sector commerce.
 Some evaluative comment on the role of business entrepreneurs in the future
development of a country.

June 2014/11
5 (a) Explain the differences between the motivation theories of Maslow and Herzberg. [8]
 Maslow essentially concerned with identifying and classifying human needs.
 Application to the work organisation is the presumption that satisfied needs at work lead
to greater productivity.
 Hierarchy of needs – from physical needs to self-actualised needs.
 Herzberg – focus on a two-factor theory.
 Hygiene factors (e.g. working conditions, salary), extrinsic factors can cause
dissatisfaction – these need to be removed but satisfaction with hygiene factors will not
necessarily create a motivated workforce. Motivating factors – intrinsic factors – are the
key to productivity (achievement, recognition, responsibility).

(b) Discuss the view that a successful business needs both effective managers and
effective leaders. [12]
 Discussion should distinguish between managers and leaders.
 Managers said to deal with the ‘now’ – set objectives, plan, co-ordinate, motivate, direct
and control (Mintzberg classification may be cited).
 Leaders – said to be more about the future – giving clear direction, and vision and
purpose for an organisation.
 Each requiring different qualities and skills.
 Arguably successful organisations need both effective managers and leaders – they can
be the same people – but not necessarily!
 Accept a discussion of the concept of informal leaders.
6 Discuss the usefulness and limitations of published accounts for business stakeholders
in measuring the performance of a company. [20]
 Published accounts are financial records of business transactions which provide essential
information to groups within and externally to a business (e.g., internal managers, staff,
shareholders, banks, etc.).
 Published accounts give information on profitability, value of fixed assets, liquidity,
growth/investment potential.
 Interested stakeholders may use accounts and examine performance indicators such as
net profit margin, level of sales, long-term liabilities. These provide indicators of
performance and financial stability/strength – more than one year’s accounts may be
examined.
 While of potential value to an interested stakeholder, published accounts have limitations:
 contain only information required by law
 it is historic information
 do not give details of each section of the business
 may not include future budgets or financial plans
 there may be ‘window dressing’
 qualitative factors such as internal health of the business not in the remit of published
accounts.
Evaluative discussion of the usefulness and limitations of published accounts for measuring
business performance.

7 (a) Explain the differences between batch production and flow production methods. [8]
 Batch production – a single product made in batches to an individual specification –
production process divided into a number of different stages – each operation at each
stage carried out in a batch, e.g. there is a demand for 500 bread rolls – allows each
batch to be matched to a specific demand specification – flexible and some economies of
scale if large batches.
 Flow production – mass production of identical standardised products – continuous
sequence of a range of different operations – large quantities produced – automatic –
lower unit costs – semi-skilled workers required.
(b) Discuss the implications for a manufacturing business of changing from batch
production to flow production. [12]
 Discussion could well focus on the explanations/definitions given in 7 (a).
  Factors that could affect a business as it moves from batch production to flow production:
o new machinery/technology – cost implications.
o impact on staff – redundancy implications.
o impact on morale/motivation of staff.
o implications for inventory requirements.
o impact on unit costs.
o impact on quality standards of products.
o the need to plan and manage this change.
o impact on consumer – standardised products.
 The effect of these factors and implications for the business also determined by the
context of the business and its products, e.g. existing levels of automation, the industrial
relations situation, the managerial competency within the business.
Evaluative comment on the implications/factors involved in this production change.

June 2014/12
5 (a) Explain the differences between McGregor’s ‘Theory X’ and ‘Theory Y’. [8]
 Theory X and Theory Y are concerned with the attitude of managers to their workers.
 Theory X managers see workers as lazy, disliking work, unprepared to accept
responsibility, needing close control and supervision.
 Theory Y managers see staff as enjoying work, they can be creative and will accept
responsibility, and contribute to decision-making.
 The impact of either approach on workers is significant.
 It leads to different kinds of management/leadership and different reactions.
NB to examiners: Candidates who only look at the theories from the point of view of worker
attitude or types of worker should not be penalised. This is an acceptable interpretation.

(b) Discuss the benefits of team working for production workers and managers. [12]
The benefits of team working are said to be:
 While working in isolation is sometimes appropriate and successful, it is argued that
working in teams can lead to high performance activity.
 For employees, team working provides an opportunity to form relationships with other
employees – share tasks – multi-task – more motivation – more involvement – more
 ideas – more sense of ownership – job enrichment through teams being given complete
tasks.
 For managers, less need for close supervision – happier employees – more productive
ideas – better quality work (quality circles) – reduce management costs (de-layer the
organisation).
 Recognition that producing high performance team work is not easy.
 Evaluative comment on team working benefits for workers and managers in context.

6 Discuss how a cell (mobile) phone manufacturer could assess the effectiveness of its
market research expenditure. [20]
 Market research is the process of collecting, recording and analysing data about
customers, competitors, and the market.
 There are various types/methods of research – and it can be very expensive.
 Measures of effectiveness can only be carried out after the research has been gathered,
analysed and used in management decisions – and are problematic.
 Measures can include:
o contribution to sales growth.
o contribution to net profit.
o contribution to product design/re-design.
o increase in market share.
o successful targeting of marketing.
o increased recognition of the brand.
o the extent of success in launching a new product.
NB Measures of effectiveness of MR expenditure may not of course always be positive – extent
of failure could be measured.
 Measuring the ROI for market research is probably as much qualitative as it is
quantitative.
 The context of cell phone manufacturing raises issues such as the extent to which the
manufacturer has been able to plan, change product design to meet the changing
competitive context and consumer aspirations.
 Evaluative comment on devising/using measures to identify the effectiveness of market
research expenditure in context.
7 (a) Explain how the effectiveness of the operations management function can be
influenced by human resource management. [8]

 Operations management decisions involve making effective use of resources (inputs),

land, labour and capital to provide outputs in the form of goods and services the
transformation process.
 Operations management and planning is concerned with:
o which resources are needed to complete the production/service process.
o how the work/process will be organised and scheduled.
o who will perform the work.
 Clearly human resource management is a critical factor in efficient and effective
operational management processes. People management decisions (HRM) will include
issues such as recruitment/selection of appropriate staff for operational efficiency – quality
of staff, skills, competences of staff, training and development of staff are all critical
aspects of efficient operations management and planning. The impact of HRM, generally
on the motivation of staff, on the culture of the organisation, and more specifically on the
motivation and culture of the operations management department/division.

(b) Discuss how the actions of competitors could influence the operations management
decisions of a car manufacturer. [12]
Answers may well describe and define the role of operations management – the concern with
effectively transforming inputs into outputs – producing final products (in this case cars) which
satisfy consumer demands and so contribute to the profitability and sustainability of the
manufacturer. Key operational decisions are made – what to produce, how to produce, where to
produce.
The actions of competitors may well create new market scenarios that require reaction and
response. Competitor actions could include: improvements in design, in quality, in cost reduction,
improved customer service, new and innovative models, more attractive pricing offers.
An operations management department will need to respond to such changing situations and
might include:
o developing a new/improved computer aided design and/or production process
o a focus on higher quality
o more ‘bells and whistles’ on cars
o develop a more efficient production platform process (including possibility of outsourcing)
 o innovation in product range and models
o more efficient distribution channels (logistics)
o more efficiency / cost-cutting
 Evaluative comment on the influence of competitors on operational management
decisions in context.

Nov 2010/11

5 (a) Explain the differences between autocratic and democratic leadership. [8]
Explanation could include explicit definition of autocratic leadership – sole decision-making –
subordinates informed and carry out decisions – leader sets out objectives – allocates tasks
– insists on obedience – concentration of power and authority.Democratic leadership
encourages participation in decision-making – consultative – can be time-consuming – loss of
control – but potentially more motivating. Sound answers will recognise that the difference is
not always as stark as these rather simplistic definitions suggest – depends on context and
character of leader.

(b) Discuss the view that a democratic style of leadership is the most effective leadership
style for a business in the competitive business environment of today. [12]

Discussion could examine and analyse the suggestion that a democratic style of leadership may
be more effective in business for the following reasons:
democratic leadership reflects the growing participation in social and public life
 people now expect more freedom and better quality of working life
 managers able to tap into ideas of knowledgeable workers
 people more committed and motivated
 ready to accept decisions – etc. Strong answers will recognise that this ‘view’ is not
always applicable and is a generalisation.
Evaluative comment on the word effective, or critique of the ‘accepted’ advantages of
democratic leadership, or explicit connection to the idea of a 21st century business and
its demands.

6 Discuss the benefits to a business of setting ethical objectives. [20]

  Discussion could include a definition of ethical objectives – ‘right and proper’ approach to
business decisions and actions – with examples in relation to pollution, treatment of staff,
suppliers, environmental issues and the potential impact of distinctive values and beliefs
of a company on its actions.
 Potential impact of ethical objectives and behaviour on securing greater market
share/profitability/image/reputation might include: marketing and publicity benefits of the
perception of being ethical – high reputation say for treating an international supplier fairly
and ensuring ethical standards by that supplier – customer perception nationally and
internationally – unique selling point (USP) all help to enhance market share. (Some may
point at the potential extra costs and the need to balance costs and benefits of ethical
objective-setting.)
• Evaluative comment on the potential impact of ethical objectives on perceived performance and
activity of a business.

7 (a) Explain the differences between ‘payback’ and ‘average rate of return’ as methods of
investment appraisal. [8]
Explanation could include: definition of ‘payback’ – the length of time it takes for a business to
recoup its original investment outlay – simple to use – based on the speed of repayment –
estimates net income flow – has its limitations – cash earned after the payback is not taken into
account and profitability of a project is ignored. ‘Average rate of return’ shows average return per
year as a percentage of the initial cost: net return (profit) per annum ÷ capital outlay (cost) × 100.
This technique shows clearly the profitability of an investment project – easier to identify the
opportunity cost of investment and to compare the overall rate of return with other uses for
investment funds. It does not, however, take into account the effect of time on the value of
money. Both identified as quantitative methods of investment appraisal.

(b) To what extent should investment decisions be made using only quantitative
information? [12]

Discussion could recognise that investment appraisal relies mainly on quantitative factors and
methods but that qualitative factors must also be considered. Indeed non-quantitative factors
could undermine or significantly influence quantitative predictions or speculation.
Qualitative data include: reputation damage caused by switching to a low-cost supplier – state
of business confidence – macro state of domestic/world economies, levels of inflation,
government measures.
Quantitative factors provide a numerical basis for decision-making but other factors need to be
taken into account, such as investing in wind turbines in a coastal area might be justified on
financial grounds but qualitative factors might be important – e.g. reaction of local community –
fit with government policy – social impact of noise, damage to ecosystems – impact of decisions
on stakeholders – long-term v short-term impact – alignment with corporate objectives – ethical
considerations – industrial relations.
 Some evaluative comment on the significance of qualitative factors in influencing
investment decisions – relative to quantitative factors.

Nov 2010/12
5 (a) Explain the differences between batch and flow production methods. [8]
Explanation will make clear the difference – Batch production – a single product made in batches
to individual specification without a continuous flow production process – e.g. the production
process divided into a number of different operations and such operations carried out on all
products in a batch – the batch then moves on to the next operation – products can be produced
in large or small batches – allows flexibility to customer needs – uses more standardised
machinery than job production – allows employees to concentrate on one specific operation at a
time – requires careful planning and co-ordination – time required to set up and start up
machinery – unit costs can be high if batches are small – money tied up in work in progress.
Flow production – mass production of identical standardised products – continuous sequence of
a range of different operations – large quantities produced – semiskilled workforce required –
unit costs reduced – high level of automation so set-up costs high – impact on worker
motivation-costs of flow interruptions.

(b) Discuss the implications for a manufacturer as it switches products from batch
production to continuous flow production. [12]
The discussion will likely build on the definition given in section (a) and unpack the
operational characteristics of the two methods of production, e.g. the move to flow production for
products implies:
 more machines/technology required (cost implications)
  impact on ability to meet customers’ needs in terms of more standardised products – less
flexibility (presumably the decision to change has taken this into account)
 implications for raw material stock (larger stock required?)
 opportunity to achieve more consistent quality standards
 reduce unit costs
 redundancy implications
 impact on worker morale – repetitive work
 so a range of issues and implications to be considered and managed. The extent and
type of these very much depend on the nature of the products, the position of the
business in terms of existing levels of automation – the industrial relations situation –
capacity and competency of the business – contextual variables.
o Evaluative reference to the contextual situation of any business embarking on this
change to flow production.

6 Discuss the usefulness of published company accounts in measuring the success of a

business. [20]

The discussion might well focus initially on unpacking or describing the component parts of
company accounts such as P and L and Balance Sheets.
Given this outline, the discussion could then identify a number of measures that are considered
to be relevant for assessing business success, i.e. performance indicators (quantitative) such as
net profit margin – level of sales – stock levels – long term liabilities – value of assets – level of
debtors. Some analysis of the value of these indicators might be given, together with a
recognition of the limitations of purely quantitative indicators set out in published accounts – i.e.
numbers may be imperfect or incomplete, trends not shown and such factors or reputation,
market share and health of the organisation culture are outside the remit of the accounts.
o Evaluative reference to usefulness and/or meaning of success added to sound analysis
of appropriate financial indicators.

7 (a) Explain the benefits to a workforce that might result from job enrichment. [8]

 Explanation could initially define the concept of job enrichment – giving employees
greater responsibility and recognition – extending their role – coming out of Theory Y
 expectations of McGregor – the vertical extension of a job – (e.g. responsibility for
planning a task, quality control activity – work supervision).
 Benefits for the individual worker include vote of confidence in worker so esteem needs
met – developing potential/undeveloped skills – more varied tasks – possibility of
promotion.
 Reference may also be made to the downside of such initiatives – employees may not
respond – union concerns – more likely to be successful in admin/technical positions than
in, say, factory work – depends on the context.
o Analysis of relevant benefits that might result from job enrichment.

(b) Discuss arguments for and against the introduction of more delegation in a business.
[12]
Discussion might well initially define the concept of delegation – passing down certain power and
authority to subordinates – the dispersal of authority – perhaps mention of the key principles of
delegation – responsibility – authority and accountability.
Arguments for might refer to:
 opportunity to empower and motivate workers
 reduce stress and pressure on more senior managers
 free up time for more senior managers to concentrate on more important tasks
 subordinates better informed about operations
 greater flexibility and quicker response to change situations
 grooms middle and junior levels for promotion
Arguments against might refer to:
 fear of and actual loss of control by those who delegate
 potential loss of strategic direction and coordination
 lessskilful/expert decision makers
 workers unwilling to accept delegated power and authority
 managers unwilling/unable to delegate
Balance of advantage very much depends on the context – the readiness of the organization and
the employees for a system of delegation and the quality of the delegation made.
o Some evaluative comment re the balance between advantages and disadvantages – i.e.
contextual issues.
Nov 2010/13
5 (a) Explain the differences between McGregor’s ‘Theory X’ and ‘Theory Y’ business
managers. [8]

Explanations could focus on the assumptions made by Theory X and Theory Y managers as to
how workers view work – the contrast between workers who don’t like working need to be told
what to do, can’t be trusted etc and those who enjoy work will work independently and are
trustworthy. How managers respond to these different workers.
o An analysis of the difference, with explicit reference to the PRACTICE of management
influenced by Theory X and Theory Y assumptions.

(b) Discuss the benefits of successful delegation for managers and workers. [12]

Answers could initially define delegation – pass down certain duties/powers to subordinate
colleagues with resulting benefits to giver and receiver. Value to manager is more time to focus
on more demanding tasks – reduces stress – for the worker it might mean empowerment, job
satisfaction and enhanced motivation. Some answers might address the assumption of
successful delegation.
o Attempt at evaluative comment relating, say, to ‘successful’ delegation, e.g. comment
relating to possibility of successful delegation becoming less successful or to difficulties/
problems of securing benefits.

6 Discuss possible benefits and limitations of market research for a car manufacturer. [20]

 Discussion might include an initial definition of market research – information collected to

satisfy customer needs – to determine consumer wants and needs – the collection and
analysis of data relating to the marketing and consumption of goods and services – the
collection of information about what consumers want and are prepared to pay for –
applied to a car manufacturer – (e.g. coffee cup holders in a car, satnav systems) –
information that will inform decisions in production and promotion.
 Benefits could refer to the value for decision-makers – more informed decisions – faster
and more sensitive decisions related to market situation – reduce risk to producers as a
new car is planned or launched – stop waste of resources – reduce the number of failed
product innovations – establish strong links with customers – give more precise
 information on market segments – good for PR and image projection – establish and
maintain brand loyalty.
 Limitations – data not always reliable – high percentage of all new products still fail –
difficult to assess the value of market research, which may well be expensive – poor
methods might be used – primary research samples may be biased – customer behaviour
is unpredictable – secondary data may not be particularly relevant. Any focus on the
specific methods and techniques of market research should be contextualised, with
obvious reference to a car manufacturer.
o Evaluative comment that analyses benefits and limitations of market research and has an
explicit reference to a car manufacturer.

7 (a) Discuss the importance of effective stock management to a business. [12]

Discussion to include a review of the necessity and importance of effective stock

management – reference to the benefits – the minimisation of stockholding costs – the
reduction of spoilage etc, the opportunity cost of poor management – the achievement of
business objectives – the satisfaction of customer demands – the establishment and
maintenance of business reputation. – Examples of particular business might be given, e.g. the
importance and necessity for a retailer – danger of empty shelves, obsolescent stock, inability to
support marketing and advertising claims.
 Some evaluative comment on the value of effective stock management and the cost of
non-effective stock management – an organisational necessity if significant objectives are
to be achieved.

(b) Explain how JIT (just in time) could be used to manage stock in a retailing business.
[8]

Explanation to define JIT initially– a manufacturing organisation philosophy decreasing waste by

supplying parts only when they are required in an assembly process – now applied to a range of
production and distribution processes.
Retail has made particular use of JIT (e.g. Tesco) as the supply chain is vital for the success of
the retail business – vital that products are distributed and supplied at right time – efficient
management of re-order lead time is vital – JIT has developed with IT developments into
continuous product replenishment (CPR) and Vendor-managed inventories – so variations on
the JIT approach at the heart of efficient retail stock management.
 Analysis of JIT and its relevance for effective stock management, with some reference to
retail business.

Nov 2011/12

5 (a) Explain the possible advantages to a business of autocratic leadership. [8]

Top-down, directive, full control leadership with little employee input. Often compared
unfavourably with democratic leadership but arguably has advantages and in appropriate
contexts is potentially very effective:

 in military and other crisis situations (fire and rescue, police)

 in times of stress and emergency, an autocratic style may well be best style to adopt
 staff need to be told exactly what to do and when to do it.

Focus on the task rather than on suggestions of ways to perform. Businesses that focus on the
task can develop a competitive advantage through increased productivity. Groups/teams often
require authoritative leadership to perform effectively and autocratic direction and leadership is
sometimes necessary.

(b) Discuss the qualities of an effective business leader. [12]

The question is about business leaders. Strong answers will do more than simply outline some
basic management roles and functions. Effective leaders may or may not be good managers.
They are described, however, as having a number of distinctive roles, e.g.:
 to give strategic direction
 to inspire others
 to shape and build organisations
 to communicate well
 to have a holistic concern for the organisation (see the big picture, think the big ideas)
 to be resilient
 to be sensitive/emotionally intelligent
 to be willing to make unpopular decisions etc.
Reward any sensible quality that clearly relates to the role of leader.
Evaluative comment on the sound business leadership qualities proposed.
6 Discuss how the ethical decisions of a large clothing retailer might help or hinder its
business performance. [20]

Answers might initially define ethical business decisions – ‘right and proper’ decisions in a
business context. There may well be moral judgements to be made and moral dilemmas to face
in the retail clothing context. Key issues are the sourcing of raw materials and the production
process in distant lands.
The advantages of an ethical stance include:
 reputation
 marketing and publicity benefits of establishing and communicating the high moral stance
taken
 competitive advantage perhaps gained
 impact on the internal culture of the retailer encouraging pride in the company.
The disadvantages of an ethical stance may include:
 costs may increase, a potential disadvantage compared with competitors
 reduced opportunity of overseas outsourcing
 more close control of suppliers required but is such control possible anyway?
Question gives opportunity to balance out both sides of the debate: ‘ethical or not?’ or ‘what
degree of ethical behaviour?’
Evaluative comment on the ethical choices and consequences for a large clothing retailer facing
ethical dilemmas and problems.
7 (a) Explain the usefulness of the ‘product life cycle’ for a marketing manager. [8]

Answers may initially define the product life cycle concept – the stages a product is said to pass
through. Possible uses include:
 one of the tools a business may use for marketing plans and strategies – identify where a
product sits in the life cycle and apply marketing expenditure accordingly
 an important tool in managing a product portfolio and mix
 indicates broad trends in revenue that a product might earn for a business
 identifies points at which a business may need to launch new products or engage in
extension strategies
 allows a business to plan different types of marketing for different products – a key tool
for a marketing manager.
(b) Discuss the advantages and disadvantages for a cinema of setting up a website to
market its services. [12]
Initially perhaps some general comments on the increasing business use of websites to carry out
significant marketing operations – advertising, promotion, selling, branding etc.
With reference to a cinema, there are some clear potential advantages:
 websites are powerful assets for business to connect with existing and potential
customers
 find out information on film showings, admission prices, book seats in advance,
information and reviews of current and future films
 encourages more business, special offers, previews and film premier showings
 target age range that is familiar with the Internet.
Potential disadvantages are:
 extra costs (additional to more traditional methods of advertising and promotion?) –
initially costly to set up
 costly to maintain – may need to buy in the expertise
 may have no choice if competitors have already moved in this direction.
Some evaluative comment on some well-explained business implications of moving to online
advertising in context of cinema.

Nov 2011/13

5 (a) Explain how technology has influenced the marketing activities of businesses. [8]
Technology has:
 given power to customers, who can choose when and how they want marketing
messages (or if they want them at all)
 given a vast array of new media options to marketing professionals
 increased the reach and targeting power of marketing – Internet, ipods, blogging, mobile
technology
 changed how brands are built and managed – brand loyalties once assumed to be givens
challenged with consumer access to competitive information through new technology
channels
 measurement of marketing impact can now be more readily quantified
 marketing landscape more complex, requiring more flexible and innovative marketing
activities and responses.
Candidates will probably not focus so much on these fundamental principles as explain the
impact of the Internet and mobile technology on marketing activities (web-marketing/online
marketing, e-marketing), giving examples of Internet marketing such as direct sales to
customers, targeted Internet marketing campaigns, showing design features of products and
services as customers research products at their own convenience. Reference might be made to
the opportunity to reach a wide audience for a small fraction of a traditional advertising budget
and to measure at a click the impact of different messages – social media in general, e.g.
Facebook and Twitter.

(b) Discuss the impact on a car manufacturer of using new technology in its design and
manufacturing operations. [12]
The benefits could include:
 improvements in quality of design and manufacture
 more standardised product quality, less room for human error
 improved productivity, allowing for 24/7 production – no need for rest days or holidays
 lower average costs (extra fixed cost more than compensated by reduction in operating
costs)
 speedier development of new cars
 quicker process of product design and development – animation and virtual reality can
 conserve resources (time, materials, energy)
 lead to more customer choice, more flexible manufacturing, less lead time, less waste,
higher finished quality.
The drawbacks might be:
 higher fixed costs
 the high initial cost of installing and updating the new technology – major capital
investment required
 retraining costs as equipment is constantly updated to ensure that new technology is used
effectively
 demotivation as automation can lead to skilled workers being reduced to machinery
operators, leading to reduced levels of worker motivation
 loss of jobs and the need to reorganise the work-place and the working environment.
Evaluative comment on the benefits and drawbacks of using new technology in context (e.g. on
balance is it good or bad?).

6 Discuss how the closure of a business owning many large retail stores might affect
different stakeholders. [20]
Answers might initially define stakeholders and then identify different ones in this business
context – company closure:
 Employee – job losses, possibility of getting new jobs, depends on local and national
economic situation, probably low skill base, impact on personal family situation.
 Customers – loss of traditional store, reduced choice (though may already have switched
shopping loyalties thus causing the closure).
 Shareholders – if a plc, share price probably hit the floor, giving significant losses.
 Local community – job losses have a multiplier effect leading to local economic
depression, impact of large empty shops in shopping areas.
 Suppliers – possible short-term losses, in search of new buyers.
 Competitors – opportunity to move into the gap created by the closure etc.
Impact depends on the severity of the economic situation and some stakeholders damaged
more than others.
Evaluative comment on the impact of this closure on specific stakeholders (possible comment on
the relative damage done, worst/least affected).

7 (a) Explain the usefulness for a business leader of McGregor’s classification of

leadership styles (theory X and theory Y). [8]
Answers may initially describe McGregor’s classification of theory X and Y as perhaps a
stark choice in making assumptions about those who a leader intends to lead and manage.
(Theory X: employees don’t like working, do as little as they can, need to be told what to do, only
interested in money, must be closely watched. Theory Y: employees enjoy their work, will work
hard to gain rewards, will work unsupervised, are motivated by things other than money.) The
classification identifies different assumptions that leaders may make in respect of employee
attitudes to work. It suggests that as a result of these different assumptions, leaders may
respond differently to the leadership role or may recognise that different responses are legitimate
and appropriate. It informs leaders that there is not a one-track approach to leadership and
management. It reminds leaders that leadership and management are complex activities and the
issues raised in theory X and Y provide direction and understanding for thoughtful leaders.

(b) Discuss the factors that a business leader might take into account when choosing
between an autocratic and laissez-faire leadership style. [12]
Initially perhaps a description of autocratic and laissez-faire leadership style options. Strong
candidates (as in part (a)) may well recognise that any particular leadership style chosen and its
appropriateness depend on factors such as:
 the business context – production/manufacturing culture, service business, public sector
business, small/large business
 the expectations, experience and aspirations of employees
 the objectives and culture of particular businesses
 the skills, competencies, and predilections of leaders themselves.
Autocratic style may be appropriate for crisis or emergency situations where explicit orders are
required and expected (military, rescue services, public order). Laissez-faire style may be more
appropriate for a group of professional workers such as architects where creativity and
innovation are expected and encouraged.
Some evaluative comment on identified factors that leaders may take into account when
choosing one or both of the two leadership styles.

Nov 2012/11

5 (a) Explain how a business could use financial rewards to motivate its workers. [8]

Candidates may well put the answer into a theoretical context using Taylor and his theory of
‘economic man’ and then specifically explain the various financial rewards that might be used to
motivate workers, such as: wages, salaries, piece rate payments, payment by results,
commission, bonus payments, share ownership, fringe benefits, profit sharing etc.

(b) Discuss the importance of training and development in motivating the workforce in a
school. [12]

Staff training and development has the essential aim of ensuring that workers are well
equipped to perform duties and responsibilities now and in the future. It is considered to be
important to ensure a business has a workforce with the appropriate skills, competencies and
experience to contribute to an efficient and effective business. The discussion may give
examples of staff training: on-the-job, in-house, external, to increase productivity and capability
of workers, supporting job enrichment/enlargement policies, motivate staff, giving more
confidence/sense of achievement and staff development: prepare staff for new challenges,
promotion, secondment, delegation etc. Motivation theory references if accurate and relevant
should of course be rewarded.
The context of a school will of course have a number of different categories of workers –
academics, administrators, and support staff each having different training/development
needs.
 evaluative comment on the importance of training and development in motivating workers
in context of a school

6 Discuss the view that ‘Just-in-Time’ is the most effective way of managing the inventory
of businesses. [20]

Answers might well initially define JIT – the stock control method that aims to avoid holding
stocks by requiring supplies to arrive just as they are needed in production. This method has
influenced businesses across the world and its potential benefits and advantages might suggest
that there is no more effective way to manage inventories – it is easy to understand, it offers
significant savings in employee and capital costs, reduces wastage and supports quicker
response times for customers, reduces storage costs, etc. The benefits are potentially
considerable. However while JIT may be easy to understand it is often less easy to put in
practice and has drawbacks that may make the method unsuitable for many businesses. It
requires excellent relations with suppliers, production staff need to be multi-skilled and flexible, a
different organisational culture may be required, very accurate demand forecasts are required for
production schedules, the delivery costs of a larger number of smaller supply orders may be
higher, administrative costs may increase, costs of halting production to wait for supplies may be
costly, small companies may find IT systems required may be prohibitive, and with rising global
inflation it may make good sense to hold and store stock.
So lots of potential advantages of moving to JIT approach but there are requirements and
drawbacks that might make the system ineffective for all sizes and types of businesses.
Individual and particular company circumstances will determine the viability of adopting JIT.
Evaluative comment on the viability for businesses to adopt a JIT method of inventory control

7 (a) Explain the importance of a USP (unique selling point/proposition) to a mobile (cell)
phone manufacturer. [8]

Answers could define the marketing concept of a USP, a specific means or method of
product differentiation to gain a competitive advantage, the aspects of a product or service that
makes it different from others. The context of a mobile phone business is the intense market
competition and where products may be subject to rapid and significant changes in fashion and
technology, the requirement to continually establish and review the USP of the product and to
communicate it through promotion and advertising.

(b) Discuss how a retail store could improve customer relations. [12]

Concern for the customer is considered to be of vital importance as retail stores compete for
business (some people are in fact willing to pay a premium price for distinctive customer care). A
customer focus (or indeed obsession) is considered to be a cultural characteristic of successful
retail stores and an essential component of reputation and loyalty. Good customer care becomes
so significant and obvious that it assumes the role of a USP. A business may make improved
customer relations a key organisation objective or a key feature of the mission statement. Hence
it may use this to motivate/incentivise staff – customer relations may become a key feature of
appraisal/staff development systems. It may also prompt the business to examine the style of
management and leadership, to establish and support a culture of customer care. Specific
methods could include: opportunities for customer feedback and suggestions, improve the
service to customers, improve the range of products/information about goods, take on more
staff/more training for existing staff, etc.
 some evaluative comment on a range of practical proposals (perhaps a strategy) to
improve customer relations in a retail business

Nov 2012/12

5 (a) Explain the usefulness to a business of Mintzberg’s classification of the roles of

managers. [8]

Reference should be made to the Mintzberg model of 10 managerial roles for top managers
divided into three groups 1. Interpersonal Roles (figurehead, leader, and liaison roles) 2.
Informational Roles (monitor, disseminator, and spokesperson roles) 3. Decisional Roles
(entrepreneur, disturbance handler, resource allocator, negotiator roles). We do not require the
classification in full, rather reference to specific aspects when explaining the value of the
classification: in describing what managers are expected to do, better understanding of the
managerial function, acts as a benchmark for deciding on a job specification, for manager
training/development, The classification suggests that the manager role is quite varied and often
contradictory in its demands. The classification can be used as a set of evaluation criteria for
assessing the performance of a manager.

(b) Discuss the view that effective managers need a high level of emotional intelligence.
[12]

The view is that as well as an appropriate level of intellectual intelligence (IQ) effective
managers should have and develop an appropriate level of emotional intelligence (EI) or
emotional quotient (EQ). This is the theory of multiple intelligences and emotional intelligence is
said to be the ability to understand and manage your own emotions and those of the people you
work with and manage and so achieve better business performance. It is suggested that IQ is
insufficient for effective management, indeed too much IQ and too little EQ can lead to poor
management behaviour and low business performance. Goleman developed the notion of
emotional intelligence competencies: self awareness, self management, social awareness, and
social skills. With these managers are more likely to haveself confidence, a more realistic
awareness of employee characteristics and needs, recover more quickly from stress, manage
stress better, develop self control, become more sensitive and empathetic, negotiate and lead
with a more emotionally stable behaviour. The idea that ‘soft is hard’ for the practice of effective
management. Consider the tasks and situations a business manager needs to manage and the
value of a measure of emotional intelligence may seem obvious.
 evaluative comment on the significance of EQ to effective managers

6 Discuss the factors the senior managers of a business should consider when deciding
between a capital intensive or labour intensive production process. [20]

Answers might initially define capital and labour intensive production processes: capital intensive
involves a high quantity of capital equipment and mechanisation while labour intensive involves
a high level of labour input to the production process. These are alternative approaches and
senior managers must decide what combination of factors of production they will use.
Among the factors to be considered are the following: the nature of the product, the product
image that the business wants to establish, the relative prices/cost of the two inputs (if labour
costs are high and rising the use of capital might become economically justifiable), the size of
the business and its ability to afford expensive capital equipment, the state of technological
innovation and the decisions of competitors to modernise or change their production processes.
Labour intensive methods of production might be most appropriate for a hand built reproduction
furniture business where consumers are prepared to pay a premium for a distinctive product,
whereas mass produced items are supplied from a capital intensive process. In general terms
job production items tend to be labour intensive and flow production items tend to be capital
intensive.
 Evaluative discussion of the factors determining alternative production processes

7 (a) Explain why many businesses spend large amounts of money on market research.
[8]

Answers may well initially define market research: the collection, recording and analysis of data
about customers, competitors and markets. The question is about WHY spend money on market
research NOT how.
The reasons why businesses spend lots of money on MR could include the following: to
provide important information for business decisions relating to issues and questions such as:
will customers buy this new product or service, what will the reaction be to proposed price
changes of our products, what will be the reaction to different forms of product promotion,
packaging, distribution channels? MR might reduce risks associated with product launches,
might predict future demand changes, explain existing patterns of sales and market trends,
reveal perceived strengths and weaknesses of products and services. The provision of
information that might assist in an evaluation of current and future marketing strategies.
 analysis of reasons for market research expenditure

(b) Discuss the advantages and disadvantages of using the Internet to collect market
research data. [12]
The Internet is increasingly seen as an effective method of collecting market research
information. Visitors to sites can be asked to complete electronic questionnaires often with
incentives offered and data can be collected when visitors sign up for membership. Online
marketing research has grown considerably in recent times with surveys, and online focus
groups providing primary data. Web research has proven to have several advantages over
offline surveys and focus groups, the most obvious being speed and low cost of execution. It is
relatively low in cost in the sense that participants from all over the world can engage with a
discussion with no travel or living expenses costs. Online surveys substantially reduce paper
work, postage, phone charges, labour costs and printing expenses. Also speed of execution and
response rate can be better as responses can be made in a person’s own space and at their
convenience. Once completed, results are available to researchers immediately, can use
graphics and visual aids. There are however some disadvantages: restricted Internet access
may make it difficult to get responses from a broad cross section of
a society, rural marketing campaigns may be difficult, access to products orientated for
example to young children e.g. 4 to 10 years, there may also be a problem controlling who is in
the sample, the researcher is not able to see the participant, how can you measure respondents
expressiveness? (Technology may soon remove these limitations of course.)
There is the privacy/ethics question, will researchers sell emails and responses to other
parties, or open up respondents to unsolicited messages etc., it also needs knowledge of
software to set up questionnaires and methods of processing data and requests may deter
visitors from your website.
• some evaluative comment on the advantages and disadvantages of collecting market
research data from the internet

Nov 2012/13
5 (a) Explain the difference between CAD (computer-aided design) and CAM (computer-
aided manufacturing) in a business context. [8]

Businesses now make greater use of technology in both the design and manufacture of products
and, in the service sector, technology has improved the ability to handle and store data and has
transformed business communication.
CAD is the use of computer technology to assist in the design of a product – CAD packages
allow designers to produce two/three dimensional models of products using touch screens, light
pens, etc. – virtual reality is constructed, use of scanners, digital cameras, enhanced the ability
and possibilities of the design function. CAM uses computer software to assist in the
manufacture of products, the process of using specialised computer systems to control, monitor,
and adjust the tools and machinery used to manufacture, robotics and other forms of
automation. (CAD and CAM can be interfaced with a potential to transform the manufacturing
process, facilitating decisions about how to design and manufacture, how to make changes, and
how to invest.)
 good explanation of the difference between CAM and CAD with some analysis of the
business application of one or both

(b) Discuss the benefits and limitations of using new technology such as CAD and CAM.
[12]

The benefits could include: improvements in quality of design and manufacture, more
standardised product quality, less room for human error, improved productivity, allowing for 24/7
production, no need for rest days or holidays, lower average costs (extra fixed cost more than
compensated by reduction in operating costs), speedier development of new products, quicker
process of product design and development, animation and virtual reality can conserve
resources (time, materials, energy), lead to more customer choice, more flexible manufacturing,
less lead time, less waste, higher finished quality.
The limitations might be: higher fixed costs, the high initial cost of installing and updating the new
technology, major capital investment required, retraining costs as equipment is constantly
updated to ensure that new technology is used effectively. Demotivation as automation can lead
to skilled workers reduced to machinery operators leading to reduced levels of worker motivation
– loss of jobs and the need to reorganise the work place and the working environment.
 evaluative comment on the benefits and drawbacks of using new technology (on balance
good or bad?)

6 Discuss the view that money is the only factor that motivates people to work hard. [20]

Answers might initially recognise that financial rewards are considered to be very important as a
means of motivating and satisfying workers. Theorists such as Taylor and the ‘economic man’
theory may well be described to support the significance of monetary reward as may be
examples of specific financial rewards.
Candidates will likely suggest revisions to the ‘economic man’ theory and challenge the view that
money is the “only” motivator to hard work by citing other theorists such as Maslow, Mayo,
Herzberg, McClelland, and Vroom and their alternative theories that suggest that such factors as
enjoyment, challenge, and recognition are very important.
Suggestions may well be made that workers have a variety of needs that can be met at work and
that money is not likely to be the sole motivating force. It may also be work/organisation/person
specific.
 evaluative discussion of factors that may motivate people to work hard

7 (a) Explain the link between marketing objectives and corporate objectives. [8]

Corporate objectives provide the context and provide the strategic vision and purpose for
marketing planning and the setting of marketing objectives. Corporate objectives are
determined by senior managers and reflect the mission statement of the organisation and are
communicated to all departments. The marketing department set objectives that help the
business achieve its overall corporate objectives. If the corporate objective is to maximize profit
then marketing objectives may well focus on maximum sales at highest price possible.
If corporate is focused on social responsibility as well as profit there may well be a social
marketing approach. If a business wishes to expand internationally then marketing objectives will
be different to those supporting a consolidation in the domestic market. If the corporate objective
is to grow the business then supportive marketing objectives could include:
increase market share, gain market leadership, rebrand a product, develop new markets.
Marketing objectives must above all be based on company financial objectives.
 analysis of the link between corporate and marketing objectives

(b) Discuss how an understanding of market segmentation could help a luxury hotel
achieve its marketing objectives.[12]
Initially perhaps a definition of market segmentation – identifying different segments within a
market and targeting different products or services to them, a customer focussed marketing
strategy, the objectives of the hotel or company owning the hotel might seek to grow the
business, increase its profitability, enhance the brand, increase the volume occupancy.
Market segmentation could help by: identifying and targeting potential market segments such as
business traffic during the week, leisure traffic at weekends, special event traffic,
celebrations/weddings, conference traffic and so producing services that are specifically aimed
at particular groups leading to increased sales or identifying gaps in the market not currently
being exploited, can use price discrimination for example.
 some evaluative comment on how market segmentation might help the hotel to achieve
its marketing objectives
Nov 2013/11
5 (a) Explain the difference between revenue expenditure and capital expenditure. [8]

The distinction between capital and revenue expenditure may be explained in the
following terms:
 Definitions of both: – capital expenditure – purchase of long-lasting assets; revenue
expenditure – spending on costs and assets other than fixed assets.
 They will almost certainly be financed in different ways.
 In accountancy terms, they will be recorded differently
 All revenue expenditure will be recorded on each year’s Income Statement and will,
therefore, reduce that year’s profits; – capital expenditure is recorded on the Balance
Sheet as a depreciation item on each year’s Balance Sheet.
 Capital expenditure more likely to increase the earning capacity of a business (its
noncurrent assets) while revenue expenditure merely maintains the assets earning
capacity.
 Capital expenditure increases a business’s asset position.
 Improper asset classification can skew the financial position of a business.

(b) Discuss the appropriateness of using internal sources of finance to pay for capital
expenditure.[12]

Internal sources of finance to fund capital expenditure include:

 Retained profits in a business can finance capital expenditure – assuming it is trading
profitably.
 Newly-formed companies or loss trading companies limited opportunity to use/access
internal sources.
 Sale of assets can raise cash for established companies – leasing will also raise capital
(e.g. a company can sell its valuable HQ and lease it back).
 Reductions in working capital – can lead to liquidity concerns.
 Many advantages for using internal sources – no direct cost to the business – no
increase in liabilities or debts, or loss of control by owners.
 But not available to all companies.
  May slow down growth as there will be a limit to amount of capital available usually.
 So external sources may well be required.
o Evaluative comment on appropriateness of using internal sources.

6 Discuss the differences and similarities between ‘business enterprise’ and ‘social
enterprise’. [20]

Business enterprise defined as activity where the primary motive is profit – production of goods/
services to consumers at a profit – create wealth.
Social enterprise more narrowly defined – social mission-driven organisations applying market
based strategies to achieve a social purpose/environmental purpose – re-investment of profits
into community or back into business.
 In many ways they are very different – but in some ways very similar.
 Business enterprise may be identified as: (entrepreneurs)
 create employment – generate business activity.
 increase economic growth – GDP of a country increased.
 business grows and develops – multi-nationals.
 innovation and technological development takes place.
 international competitiveness improved – export markets.
 economic development improves social cohesion.
 all the benefits of a successful market enterprise system.
 but can be socially responsible (and socially irresponsible) and advance social issues
and cohesion.

 Social enterprise may include: (triple bottom line)

 specific social benefit to economies (national and local).
 create employment for often disadvantaged employees and communities.
 protect and advance environmental issues alongside production processes.
 re-distribute production benefits, not just to shareholders or a limited number of
shareholders.
 complement wholly public sector owned organisations.
 highlight ways in which business enterprise can be improved.
 in so doing create employment – generate taxation and economic benefit.
Social enterprise units can be entrepreneurial and very efficient, and business enterprise units
can be very socially responsible.

 Evaluative comment on the differences and similarities between ‘business enterprise’ and
‘social enterprise’ for economies.

7 (a) Explain why some businesses might use both above the line and below the line
methods ofpromotion. [8]

‘Above the line promotion is:

 A form of paid-for communication by business in the mass media to inform and persuade
 E.g. advertising on TV, cinema, newspapers.
 Main aim is to inform, raise awareness and build brand positioning – relatively high cost
promotion.
 It can be targeted but often is seen by anyone outside of the target audience.
 Communication targeted to a wider spread of audience and not specific to individual
consumers.
Below the line promotion is:
 Promotional activities where business has direct control over the target or intended
audience – sales promotions – personal selling, sponsorship, PR, point of purchase
promotions.
 Designed to achieve short-term sales increases and repeat purchases by consumers.
 More one-to-one approach, e.g. sampling, demonstrations – more touch and feel.
Why use both:
 These two types of promotion are used in pursuit of essential marketing objectives – To
maximise the present information to customers and others. To increase demand and
build brand awareness. To differentiate a product and drive sales through specific
promotional offers.
– The distinction between the two kinds of promotion is not absolute and some see the
terminology as antiquated – digital communication has broken down the boundaries –
now the phrase ‘Through the line’ is increasingly being used where for example a TV
advert is combined with a flyer through the door – multiple consumer engagement
points.
(b) Discuss the advantages to a designer of children’s clothing of establishing a powerful
brand identity. [12]
The discussion of advantages from effective branding could include:
 A strategy that differentiates a product from competitors by creasing an identifiable image
and clear expectations of the product.
 It can create a powerful image in the minds of customers, e.g. for quality/style.
 Provides a product with a unique identity.
 Increase the chances of brand recall by consumers.
 Allow for a ‘family’ of closely associated products to be established.
 Reduce price elasticity of demand as consumers prefer well known brands.
 Increases consumer loyalty to brands.
 Brand can give reputation and goodwill.
 Creating durable and distinctive perceptions in the minds of consumers is then potentially
very valuable – but it can be expensive to establish and it needs careful protection and
safeguarding.
o Evaluative comment on advantages of effective branding in context.

Nov 2013/12
5 (a) Explain the importance of cash flow forecasts to a newly established business. [8]

Cash flow forecasts.

 Identifies sources and amounts of cash coming into a business.
 Identifies destinations and amounts of cash going out of a business.
 Usually done for a year or quarter in advance.
 Allows the prediction of peaks and troughs in cash balances.
 Helps to plan how much and when to borrow.
 Banks require cash flow forecasts before considering a loan.
 All these factors are important for new businesses who may well encounter cash flow
problems.
 New business planning requires cash flow forecasts to help identify future problems,
inspire
confidence in lenders, help obtain funding and help new businesses to survive in the short
term.
(b) Discuss how a business could solve cash flow problems. [12]
The reasons for cash flow problems may include:
 Lack of financial planning (e.g. no cash flow forecasts).
 Poor credit control – bad debts will increase.
 Too generous trade credit.
 Unexpected cost increases.
 Unexpected dip in customer demand.
 Incorrect forecasts.
 Expansion too fast.
 Possible solutions to cash flow problems:
 Essentially, more cash inflows –
 overdraft/short-term loans.
 sale of assets.
 sale and leaseback of assets.
 reduce credit terms.
 debt factoring.
 Essentially, less cash outflows –
 delay payments to suppliers.
 delay spending on capital equipment.
 use leasing of capital equipment.
 cut overhead expenses (e.g. promotion costs).
Evaluation: causes and solutions for cash flow problems.

6 Discuss the important factors that will need to be considered by a business in deciding
where to locate a new adventure and amusement park. [20]

The most important factors affecting the location decision are likely to include:
 A recognition that this is a long-term, strategic, optimal decision.
 Location should sustain long-term profitability.
 Location should have flexibility to expand and grow.
Specific factors might include:
 site, building, fitting costs
  labour costs
 transport costs/facilities
 sales revenue possibilities
 availability of government grants
 cultural features of alternative locations
 environmental issues
 quality of infrastructure
 site of competition
Decisions likely to be a set of compromises – an optional solution is not always clear cut –
level of risk.
Optimal location decisions can be affected by cost and other factors changing over time.
Evaluation: the complexity of location decision, in context.

7 (a) Explain the differences between Herzberg’s hygiene factors and motivating factors.
[8]

Herzberg ‘two factor theory’

 ‘Hygiene factor’ is related to aspect of a worker’s job that may have the potential to give
dissatisfaction.
 Pay, working conditions, status, type of supervision – these are seen as lower order
needs.
 The extrinsic factors that surround a job – these need to be addressed by management in
order to remove dissatisfaction.
 But if hygiene factors are OK, they would not, by themselves, lead to motivated workers.
 A second set of factors – motivators need to be addressed.
 These are the intrinsic factors – achievement, recognition, work itself, responsibility and
advancement.
 To motivate, you focus on these higher order needs, e.g. job enrichment.
 So, to remove dissatisfaction, focus on the job environment – to increase motivation,
focus
on the job itself.
NB. An acceptable alternative approach would to discuss Herzberg’s hygiene factors and
then general ‘motivating factors’

(b) Discuss the relevance to employees of a fast food restaurant of the motivational
theories of Maslow and Herzberg. [12]

The discussion will likely include the following:

 Reference to Maslow’s hierarchy of human needs.
 these needs can be satisfied at work.
 lower and higher order needs.
 some general concerns about this theory, e.g. money is important for lower order needs
but can play a role in satisfying higher order needs, e.g. status and esteem.
 specific concerns – do workers work in fast food restaurants to satisfy higher order
needs?
 Application of the hierarchy to the context is expected.
 Reference to Herzberg and his ‘two-factor theory’.
 ‘extrinsic factors’ more likely to be significant in the context of a fast food restaurant?
 how significant are ‘motivators’?
 opportunity for team work and job enrichment may exist in a fast food restaurant so
‘motivators’ may be important.
Evaluation: the relevance of one or both of these theorists to the context of a fast food
restaurant.

Nov 2013/13
5 (a) Explain the importance of inventory management to a retail business. [8]
Inventory management is considered a critical business activity because without efficient
inventory management there may be:
 insufficient stocks to meet demand and changes in demand.
 out of date stock.
 stock wastage.
 excessive storage costs.
 late deliveries.
  low discounts from suppliers.
 opportunity cost implications.
The factors above (especially the first 3) are vital for retail businesses with their potential
impact on customers.

(b) Discuss the factors which could influence the successful operation of Just-in-Time
(JIT)
inventory management. [12]

The factors that might need to exist for JIT to work effectively are generally considered to be
(after defining JIT):
 Relationships with suppliers need to be good – flexible.
 Production staff need to be multi-skilled and flexible.
 Similar flexibility required in equipment and machinery.
 Demand forecasts and production schedules need to be accurate.
 Up-to-date IT equipment will help.
 Sound employer-employee relations required.
 A distinctive organisation culture required.
 JIT might not always be the answer.
Evaluation: the relative importance of the factors and/or recognition of the problematic
application of the system.

6 ‘Effective business leaders need to be more emotionally intelligent than intellectually

brilliant.’Discuss this statement. [20]

Business leadership is said to be about giving clear direction and vision for an organisation –
often
requiring charismatic attributes and strategic vision.
 Intellectual ability can be said to be important –ability to see the big picture– ability to
differentiate between tactical and strategic issues– ability to analyse, evaluate, make
decisions– ability to understand and apply theory and concept– ability to convince others
– negotiate – compromise etc.
  Emotional intelligence – a recent concept is seen by many as important, if not more
important than intellectual intelligence for effective leadership – the concept of multiple
intelligences.
 definition of emotional intelligence – the ability to understand own emotions and that of
their colleagues, manage them to support improved performance.
 the concept of Emotional Intelligence Quotient and Golemans EI competences.
 the potential liability of a leader without a competent EIQ.
 The relative importance of IQ and EIQ – reviewed – different assertions and conclusions
in the literature.
Evaluation: the statement vis-à-vis intellectual ability and emotional intelligence.

7 (a) Explain why it is important for a business to be able to identify and calculate its
costs. [8]

The identification and calculation of business costs is considered important as:

 Cost information is vital in a wide range of business decision-making.
 Business costs are a key factor in calculating profit or loss.
 In making location decisions, pricing decisions, product profitability over time.
 Acting as a start point for future budgets.
 Decisions about resource use – if cost of labour is low, then focus on labour intensive
methods.
 Cost information facilitates different options being analysed for decision-making – e.g.
different location decision options. So cost calculation and data vital for so many business
decisions.
 NB: Credit discussion of social costs
• Analysis of the importance of cost identification and calculation.

(b) Discuss how break-even analysis could be useful for a business decision on
introducing a new product. [12]
The use of break-even analysis for introducing a new product could make the following
points:
 Discuss how break-even analysis will categorise production costs and compare them with
potential sales revenue to determine a break-even point where the costs of resources to
create a new product are covered.
  Managers may also want to know the point at which the sales volume reaches a pre-set
profit level.
 To help increase the odds of success for a new product a business needs to ask a
number of questions such as what is the potential size of the market, how shall the
product be priced?, where is the break-even point? Is one of these questions it can
provide vital management information.
 E.g.: if the B/E point is over say 12 months, how does the business capitalise that product,
and is it worth going ahead with this new product.
 B/E charts relatively easy to construct and interpret.
 However, there are limitations as to the use of B/E analysis – simplistic, a static model,
the effectiveness depends on the quality and accuracy of the data used – assumes
linearity, no account of possible changes in costs over time – does not allow for changes
in market conditions in the time period etc.
 So some general limitations plus some specific to new product decisions – noneconomic
factors may influence such a decision – e.g. subjective personal owner preference
decisions – political interference, social/cultural influences, etc.
Evaluation: the usefulness of B/E analysis and its possible limitations, in context.

Nov 2014/11
5 (a) Explain why a business needs to hold a suitable level of cash. [8]
This is a question about the importance of liquidity and cash flow.
 Businesses must ensure that they have enough cash to meet all demands in the short
term.
 While it is important in the long term for a business to make profits, in the short term cash
flow and liquidity issues are of vital importance.
 Many profitable businesses fail because of insufficient liquidity.
 Businesses need to keep a constant watch for signs of liquidity problems.
 Holding a sufficient level of cash to ensure that short term liabilities are met and that the
day to day needs of the business can be covered.
 Businesses may over trade: a business may be expanded too rapidly without the
necessary finance so that a cash-flow shortage develops.
 Cash flow and liquidity issues are particularly significant for small and new businesses.
(b) Discuss how a small business could improve its cash flow. [12]
Cash is the lifeblood of a small business. So cash flow analysis is vital for small businesses.
They must first identify reasons for cash flow problems in order to take steps to improve the
situation.
Some specific ways for improvement may include:
 reduce fixed costs such as rent, building costs, staff expenses...this is probably a difficult
option
 seek to lower your variable costs - lower your costs of goods sold
 trim inventory-possibly giving fewer choices to customer
 bill promptly and review credit policy
 recover debts and better manage late payments
 make a more attractive offer to customers
 seek better deal with suppliers
 consolidate loans for better interest rate
 check prices in respect of competition (often customers expect small and regular price
increases)
 sell underutilised assets
 approach bank for extended overdraft.
Strong candidates may well recognise that the measures set out above are not` specific` to
small businesses – small businesses may not be able to adopt some/all of these measures.
Evaluation: the likely impact/success of particular measures for small businesses.

6 Discuss the main factors an electronic goods manufacturer should consider before
deciding whether to sell its products through the Internet. [20]

A business should be clear why it is considering selling on the internet – to open up the business
to a much bigger market and increase sales? – should this happen, has it got the productive
capacity and the financial resources to expand?
Factors to consider might include:
 Review the logistics of selling online – can you deliver the product easily and cost
effectively to customers?
 A website needs to be designed – need to employ a specialist designer to produce a
functional website?
  Determine how the business will market products – decide how to create a large amount
of traffic on website.
 Need to review costs (extra costs) associated with online selling, e.g. cost of designing,
maintaining, hosting website – marketing expenses, payment processing costs.
 Need to do a cost/benefit exercise – is profitability maintained or enhanced or
depressed?
 Continue with traditional selling to spread the risk?
 How well will the internet serve your business needs?
 How well will your particular business model fit into the way the World Wide Web works?
(context to be referenced).
N.B. The context in this question is ‘electronic goods manufacturer’.
Evaluation: discussion of main factors that could be considered (in context).

7 (a) Explain the weaknesses of ‘family owned’ businesses. [8]

The inherent strengths of family owned businesses – businesses where the voting majority is
in the hands of the controlling family – are many for example:
 family dedicated to business – work hard to build and grow the company and re-invest
profits and there is pride and focus in reputation and quality of product and maintain good
relations with external stakeholders.
 But, the weaknesses often outweigh the strengths, weaknesses such as: complexity of
different roles played by family members and governance problems –different motives
and strategies from different family members
 too much informality, not enough clear business practices and procedures – with growth
may come significant conflict
 neglect of strategic management, succession planning, lack of external management
expertise
 plus, family owned businesses may have poor cost control, poor cash flow, poor
management
 means that the majority of family owned businesses are not sustainable
 discipline difficulties i.e. reluctance to discipline or sack family members
 family arguments might be brought into the work situation.

(b) Discuss why some businesses do not set a growth objective. [12]
It is often assumed that one of the main objectives of a business is to grow – this may not be
the case. There may be reasons why a business cannot grow and reasons why a business
does not want to grow:
 Businesses may not have the option to set growth as an objective – they may operate in a
niche market.
 Limited capital may prevent growth.
 Businesses may be family businesses with neither the ambition nor the capacity to grow.
 Businesses do not have to grow to become (more) successful.
 They can exploit their advantages – a small business has manoeuvrability – it can act and
react fast.
 They can grow through outsourcing or joint ventures.
 Businesses can give customers the satisfaction of personal interacting and thus retain
their competitive advantage.
 Non-pecuniary benefits – being one’s own boss, flexibility are first order issues for small
business owners.
 Businesses often content to exploit entrepreneurial skills and competences in a selected
restricted area of business.
 The nature and composition of many businesses (e.g., small shops, solicitors,
accountants, restaurants, small-scale manufacturing, means that they do not seek growth.
 Businesses survive and succeed by remaining small and supply to large businesses.
 Might be new/small business; growth is not yet an appropriate aim.
 Shareholders might not want a company to grow.
Evaluation: the reasons for businesses not setting growth as an objective.

Nov 2014/12

5 (a) Explain the interrelationships that exist between marketing and other departments
within a business. [8]

 As a business activity, marketing has important links with other functional departments,
e.g.finance and H.R.M.
  In order to achieve marketing objectives such as increased sales and profits, a marketing
department will have a significant influence on the work of other departments.
 Market research data may have a key role in new product development and sales
forecasts will impact on operations department as it plans for capacity and inventory
levels.
 H.R. departments will have to ensure appropriate levels of staff are in post in production
and sales to meet the marketing forecasts.
 Finance departments will need to support a planned marketing budget and use marketing
data to devise operational budgets and cash flow forecasts.
(b) Discuss the advantages and disadvantages of niche marketing for a small
manufacturer of fashion clothing. [12]

 For smaller businesses mass marketing is not an option – too expensive.

 The best niche marketing is based on designing goods or services specifically tailored to
the needs of particular customers.
 Lower initial costs, especially for advertising.
 Focus on company strengths and their niche targeted activity.
 Competition may ignore the niche – too small – or unaware.
 Businesses can develop expert knowledge in the niche giving a real advantage over
potential customers.
 However, market niches can disappear as a result of changes in economic conditions,
fashion, or taste.
 Mass market businesses may target the niche if it grows in value or size – small firms may
find the competition too strong.
 Niche marketing vulnerable to big and/or frequent swings in consumer spending.
 Economies of scale are limited.
6 Discuss the usefulness of profitability ratios and liquidity ratios for senior managers
when analyzing the performance of their business and their competitors. [20]

 Accounting ratios (such as profitability and liquidity ratios) assist managers to analyse the
current financial position of a business.
 Ratios simplify understanding of financial statements and identify changes in the financial
condition of a business.
 Ratios facilitate inter-business comparisons. Ratios highlight the factors associated with
 successful and unsuccessful businesses.
 Ratios assist in financial planning, forecasting, and control – basic management functions.
 Ratios indicate level of suggested management efficiency – if resources are being
employed
efficiently, if sales revenue is being converted into net profit, if the company is managing
working capital effectively.
 However, accounting ratios have limitations – even though they are simple to calculate
and easy to understand.
 Financial statements (from which ratios are calculated) may be affected by accounting
conventions and concepts.
 Forecasts based on ratio analysis may be substantially affected by factors such as market
conditions and management policies.
 Non-financial issues/charges not reflected in the ratios may be more important than
financial
indicators.
 Competitor companies may use different accounting principles and procedures so making
comparison difficult.
Evaluation: discussion of the value of both accounting ratios for senior managers.

7 (a) Explain the aims of a ‘social enterprise’ organisation. [8]

 A business with mainly social objectives that reinvests profits into benefiting society, rather
than maximising returns to owners.
 Have distinctive aims and objectives – while sharing some characteristics of other types of
organisation – they rely on the market and sales for income – but they have a sense of
social mission and have social ownership structures.
 They seek to use business solutions to achieve public good – and operate in a wide range
of areas, e.g. health and social care, transport, childcare in U.K.
 So they have social and business aims (often referred to as “double bottom line”, or some
add environmental aims and are referred to as “triple bottom line”.
 They have economic objectives – profit to reinvest.
 They have social objectives – provide jobs and support communities, often disadvantaged
sections of communities.
They often have environmental objectives – to manage the business in an environmentally
sustainable way.

(b) Discuss the importance of ‘business enterprise’ in your country. [12]

 Business enterprise defined as initiatives concerned with taking risks and setting up
businesses making things happen – business opportunities are identified and calculated
risks are taken.
 Those who take risks and show enterprise called entrepreneurs – they make a major
contribution to the development of business enterprise in a country – seize initiatives –
add value, create jobs – make profits – contribute to social investment via taxation.
 Business enterprise(s) considered to be important in that:
 Jobs are created.
 Economic growth – increased living standards – tax revenues for governments to spend
on infrastructure.
 Businesses grow, expand, diversify and support a more developed economy.
 Adds dynamism to an economy – increased use of I.T. and new technology.
 Helps improve international competitiveness – exports.
 Helps achieve social cohesion in a country and supply important social goods.
 Economic development comes from economic growth which is significantly supported by
business enterprise – countries become industrialised and modernised through sustained
business enterprise activity.
Evaluation: the importance of business enterprise(s) to the development of a country (in
context).

Nov 2014/13

5 (a) Explain the benefits to a railway company of using price discrimination for ticket
sales. [8]
 Price discrimination is when a business charges a different price to different groups of
customers for IDENTICAL goods or services for reasons not associated with cost.
 A business must be able to segment the market and be able to keep the segments
separate. Train companies identify customers with different demand elasticities and
charge differential prices for tickets. Different groups of customers that can be kept apart
such as students, older people, families, can be charged different prices for the same
 journey. Price discrimination provides opportunities for maximising revenue and boosting
sales

(b) Discuss why a business could use different pricing strategies during the life of a
product or service. [12]
In response to why different pricing strategies could be adopted, the following points could
be made.
 To reflect specific business/marketing objectives and strategies such as to maximize
profits or sales, to ward off competition.
 To respond to changes in market conditions.
 To manage the life cycle progress of the product/service.
Answers may well give examples of how these pricing strategies are implemented. This is
legitimate as long as the focus of the answer is on why different pricing strategies are used.
 A skimming pricing policy could be adopted in the early stages of a product life – but
perhaps only for a limited time – to exploit the uniqueness of the product/service.
 A penetration pricing strategy could be adopted to gain market share (again possibly for a
limited time).
 A competitive pricing strategy could be adopted to combat difficult trading conditions and
protect sales against competitors.
 Other pricing strategies could be adopted (cost plus, loss leader) depending on business
objectives, marketing strategies, and product life cycle stages management.
Evaluation: why different pricing strategies could be adopted during the life of a
product/service.

6 Discuss the factors a large manufacturing business should consider before relocating
its operations to another country. [20]
 A major operational management decision – factors affecting any location decision will be
relevant, e.g. site/building costs, labour costs, transport costs, government
grants/government support, profit estimates.
 Re-location overseas involves other factors such as – can it achieve significant
reductions in cost – are they sustainable – how big is the market potential in this new
country – governmental financial support available? – Level of education / qualifications
of staff –cultural differences.
  Specification lists issues such as geography, demography, legal issues, political stability,
resource availability, infrastructure and markets as potential important factors influencing
an international re-location decision.
 Movement of exchange rates could be significant.
 A mix of economic and non-economic factors.
 Content specific to a manufacturing company could include availability of local
manufacturing skills/experience, ease of communication/use of local language, use of IT
in process engineering.
Evaluation: discussion of factors likely to influence a decision to relocate (in context).

7 (a) Explain the strengths and weaknesses of a ‘co-operative’ legal structure for
business. [8]

o These are joint ownership organisations – consumer, producer, agricultural worker

co-operatives – member owned – meet common economic, social and cultural needs of
members.
Strengths:
 Easy to set up.
 Open membership.
 Democratic management.
 Shared objectives.
 More responsible to communities and customers.
 Share surplus.
 Limited liability.
Weaknesses:
 Likely limited resources.
 Management can be inefficient.
 Disputes and differences can occur.
 Longer decision-making process.
 Lack of capital.
 Mass of members may lose interest.
(b) Discuss how ethics may influence the activities of a business. [12]

 Business ethics are concerned with how businesses treat the environment, work with
staff and suppliers to build a responsible company, relate to local communities and
produce a viable, sustainable company and adds value socially as well as economically.
 Business ethics now part of the language of business, customers demand more and
management is trained to deliver more.
 May mean that a business makes explicit provision for ethical behaviour and ethical
performance.
 Might mean additional costs.
 More monitoring (e.g. of suppliers).
 May mean new and different practices, e.g. waste disposal – treatment of
additional/different shareholders.
 May be seen as part of brand building and reputational protection (USP).
 May be a source of additional investment for ethical investors.
 So positive and negative implications – becoming a necessity rather than a discretionary
approach to business decisions.
Evaluation: the influence of ethics on business activity.